University of Nigeria Research Publications UCHE, Remigius Iheanacho Author PG/MBA/93/18003 Title A Feasibility Study and Viability Appraisal of the Establishment of a Small Scale Soap Manufacturing Industry in Ahiazu Mbaise L. G A. Imo State Faculty Business Administration Department Management Date September, 1995 Signature
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University of Nigeria Research Publications
UCHE, Remigius Iheanacho
Aut
hor
PG/MBA/93/18003
Title
A Feasibility Study and Viability Appraisal of the Establishment of a Small Scale Soap
Manufacturing Industry in Ahiazu Mbaise L. G A. Imo State
Facu
lty
Business Administration
D
epar
tmen
t
Management
Dat
e September, 1995
Sign
atur
e
A F E A S I B I L I T Y S'TUDY AND V I A B I L I T Y A P P R A I S A L
OF THE E S T A B L i S H h E N T O F k S W L L SCALE S O A P
F i N U F A C T U K I N G INDUSTRY I N AHIAZU MBAISE L . G. A .
I N 0 S T A T E .
UCHE , REMI G I U S IHEANACI-I0
P G / M B A / 5 3 / 1 8 0 0 3
DEPARTMENT OF MANAGEMENT
SCHOOL O F P O S T GRADUATE S T U D I E S
U N I V E R S I T Y O F N I G E R I A
ENUGU CAMPUS.
S E P T E M B E R , 1Y95 .
A F E A S I B I L I T Y STUDY AND V I A B I L I T Y A P P M I S A L
O F THE ESTABLISHMENT O F A SMALL SCALE SOAP
MANUFACTURING INDUSTRY I N AHIAZU MBAISE L . G.A.
IMO S T A T E .
A P O S T GRADUATE P R O J E C T WORK CONDUCTED
I N P A R T I A L FULFILMENT FOR THE AWARD O F
MASTERS DEGREE I N B U S I N E S S A D M I N I S T R A T I O N
( M B N
UCHE , R E M I G I U S IHEANACHO
P G / M B A / 9 3 / 1 8 0 0 3
DEPARTMENT O F MANAGEMENT
SCHOOL O F P O S T GRADUATE S T U D I E S
U N I V E R S I T Y O F N I G E R I A
ENUGU CAMPUS.
SEPTEMBER, 1995 .
CERTIFICATION
UCHE REMIGIUS IHEANACHO, a p o s t g r a d u a t e s t u d e n t i n t h e I
Department of Management w i t h r e g i s t r a t i o n number, PG/MBA/93/18003
h a s s a t i s f a c t o r i l y completed t h e requ i rements f o r course and
r e s e a r c h work f o r d e g r e e of asters I n Bus iness A d m i n i s t r a t i o n (MBA)
i n Management.
The work embodGd i n t h i s p r o j e c t r e p o r t i s o r i g i n a l and h a s
n o t been s'ubmitted i n p a r t ' o f f u l l f o r any o t h e r diploma o r degree
of t h i s o r any o t h e r U n i v e r s i t y .
PROF. EJU. L . IMAGA
5 SUPERVISOR. 1
DEDICATION
T h i s work i s d e d i c a t e d t o
God Almighty t o Whom what 1 am and
what 1 hope t o be 1 owe.
ACKNOWLEDGEMENT
The r e a l i s a t i o n o f eve ry ambi t ion i s a f u n c t i o n
o f s e v e r a l i n d i s p e n s a b l e f a c t o r s , bo th human and m a t e r i a l .
A s it has become a t r a d i t i o n t o show a p p r e c i a t i o n when-
e v e r one r e c e i v e s any goodwil l o r b l e s s i n g i n t h e cou r se
o f a ch i ev ing ones ambi t ion , 1 wish t o acknowledge t h e
e f f o r t s and c o n t r i b u t i o n s o f s e v e r a l i n d i v i d u a l s who
made p o s s i b l e , t h e s u c c e s s f u l complet ion o f t h i s work.
I w i l l s t a r t by g i v i n g s p e c i a l thanks and p r a i s e s
t o God Almighty f o r H i s goodness and merc ies un to me
i n t h e r e a l i s a t i o n o f t h i s s i n g u l a r o b j e c t i v e -
I wish a l s o t o exp re s s my profound g r a t i t u d e t o my
Supe rv i so r and Dean Facu l t y o f Business Admin i s t r a t i on ,
D r E . U . L . Imaga who i n s p i t e of h i s numerous a d m i n i s t r a t i v e ,
academic and p r i v a t e engagements made t h e s u c c e s s f u l
complet ion o f t h i s p r o j e c t p o s s i b l e through h i s c o n s t a n t
u s e f u l a d v i c e , s u p e r v i s i o n and c o r r e c t i o n s . H i s c o n t r i b u -
t i o n s he lped immensely i n a ch i ev ing t h e d e s i r e d q u a l i t y
and s t a n d a r d .
I a l s o e x p r e s s my s i n c e r e thanks t o my p a r e n t s ,
M r and Mrs H.I.Uche, my b r o t h e r s , C h a r l e s , Obinna, Tony,
A u s t i n , my S i s t e r s S t e l l a and Chinwe f o r be ing so n i c e
t o me always.
Let me a t t h i s j u n c t u r e pay s p e c i a l t r i b u t e t o my
jewel o f i n e s t i m a b l e v a l u e , Onyinyechi Marian f o r
remaining s t e a d f a s t , c a r i n g and l o v i n g th roughou t t h e
t r y i n g p e r i o d s . I commend h e r f o r h e r c o n s i s t e n c y and
p e r s e v e r a n c e d e s p i t e a l l odds and p r a y t h a t God w i l l
g r a n t h e r t h e o p p o r t u n i t y t o r e a p t h e f r u i t o f h e r l a b o u r .
I wish a l s o t o remember i n a s p e c i a l way some one
, who h a s - been s o n i c e t o me, a f r i e n d i n d e e d , a m o t i v a t o r ,
i n s p i r a t o r and mover o f men, Ch ie f D.I.C. Amadi who
th rough h i s numerous f i n a n c i a l c o n t r i b u t i o n s made v e r y
p o s s i b l e t h e s u c c e s s f u l comple t ion o f t h e p r o j e c t i n
p a r t i c u l a r and t h e programme a s a whole. Words a r e n o t
enough t o e x p r e s s my s i n c e r e t h a n k s and a p p r e c i a t i o n t o
him b u t p r a y t h e Almighty God t o c o n t i n u e t o b l e s s him
abundan t ly .
I am a l s o i n d e b t e d t o t h e f a m i l i e s o f Nze and Lolo
M.O.Anyanwu and M r and Mrs C h r i s Okechukwu f o r b e i n g such
wonderful f a m i l i e s . God w i l l c o n t i n u e t o b l e s s you a l l .
My s i n c e r e t h a n k s and a p p r e c i a t i o n a l s o go t o my
c o l l e a g u e s i n t h e Finance Department, M r P h i l i p ugwfi
and Chukwuma Nna j i f o r t h e i r c o n t r i b u t i o n s i n t h e f i n a n c i a l
a n a l y s i s a s p e c t o f t h i s p r o j e c t .
I rem&er a l s o i n a s p e c i a l way t h e f o l l o w i n g p e o p l e ,
P e t e r Eke, Law Onuoha, Alex Brown, Eddy H i l l y Okoro, \
Dickson Oyovwi, Joseph Akpaka (Big J o e ) , Chidi Onyemelukwe,
Ken Opara, J . C . Anene, Wi l ly Njoku (Evergreen) ,
Uwazie Anyanwu, Paschal Nj oku,Ben Obasi , Udensi Orj i
and a h o s t o f o t h e r s f o r be ing so n i c e t o me.
To a l l t h e s e people and o t h e r s n o t mentioned
he re who c o n t r i b u t e d i n one way o r t h e o t h e r towards
t h e r e a l i s a t i o n of t h i s o b j e c t i v e , 1 say thanks a
m i l l i o n t imes and God b l e s s .
REMIGIUS I . UCHE
SEPTEMBER, 1995.
ABSTRACT
The need f o r , p r o j e c t o r investment a p p r a i s a l a r i s e s
from t h e s c a r c i t y o f r m f Q s w h i c h i s a t t h e r o o t of
most o r g a n i s a t i o n a l d e c i s i o n s . The a t t a inment o f .
o r g a n i s a t i o n a l o b j e c t i v e s i s a p roces s i nvo lv ing t h e
a l l o c a t i o n of r e sou rces between money spen t i n one way t o
b e t t e r achieve one o b j e c t i v e and t h a t spen t i n ano ther
t o achieve ano ther o b j e c t i v e . Once t h i s b a s i c concept
o f resource a l l o c a t i o n i s unders tood t h e essence o f
p r o j e c t e v a l u a t i o n can then be app rec i a t ed .
S ince r e sou rces a r e s ca rce and l i m i t e d , they must
be pu t t o t h e most e f f e c t i v e use . The purpose of
p r o j e c t a n a l y s i s i s t o achieve t h i s end by making a s
su re as t h e c i rsumstances permi t t h a t t h e p r o j e c t i s
t e c h n i c a l l y sound, t h a t i t w i l l p rov ide a reasonable
economic and where a p p r o p r i a t e , f i n a n c i a l r e t u r n , t h a t
i t s o b j e c t i v e can be achieved i n some l e s s c o s t l y way.
A This ~ o r k ~ t h e ~ e f o r e , aimed a t e s t a b l i s h i n g t.he t e c h n i c a l
f e a s i b i l i t y , economic v i a b i l i t y and s o c i a l p r o f i t a b i l i t y
of e s t a b l i s h i n g a smal l s c a l e soap manufactur ing i n d u s t r y
i n Ahiazu Mbaise Local Government Area, Imo S t a t e . I n
pursuance of t h i s o b j e c t i v e , bo th secondary and primary
d a t a were used. The primary d a t a invblved t h e use o f
r e sea rch q u e s t i o n a i r e s mainly t o determine t h e m a r k e t a b i l i t y
and a c c e p t a b i l i t y of t h e p roposed p r o d u c t i n t h e a r e a .
Also f i e l d surveyswere c a r r i e d o u t t o de te rmine t h e
s u i t a b i l i t y o f t h e l o c a t i o n a l s i t e i n t e rms o f a c c e s s i -
b i l i t y and a v a i l a b i l i t y o f t h e needed raw m a t e r i a l s
and u t i l i t i e s . Secondary d a t a covered t h e r ev iew o f
r e l a t e d l i t e r a t u r e on t h e i s s u e .
I t i s p e r t i n e n t t o n o t e t h a t t h e U n i t e d N a t i o n s
I lndus l r i a l~~Deve lopment o r g a n i s a t i o n (UNIDO) fo rmat o f
p r e s e n t i n g f e a s i b i l i t y r e p o r t s was adop ted i n t h i s t e x t .
T h i s e n t a i l e d t h e market s t u d y and a n a l y s i s , m a t e r i a l s
i n p u t , l o c a t i o n and s i t e , p r o j e c t e n g i n e e r i n g i n v o l v i n g
t h e machinery and equipment and t h e t e c h n o l o g y and - .
p r o d u c t i o n p r o c e s s , manpower r e q u i r e m e n t s , f i n a n c i a l
and economic a n a l y s i s i n v o l v i n g t h e d e t e r m i n a t i o n o f
t h e t o t a l p r o j e c t c o s t , p r o j e c t e d income s t a t e m e n t ,
p r o j e c t e d cash f l o w , b a l a n c e s h e e t , r e t u r n on i n v e s t m e n t ,
payback p e r i o d e t c .
F i n a l l y , f a r r e a c h i n g recommendations were made on
t h e r e a l i s a t i o n o f t h e s t u d y o b j e c t i v e based on t h e
r e s e a r c h problems and f i n d i n g s i n t h e a r e a o f implemen- - t a t i o n .
T A B L E OF CONTENTS
C e r t i f i c a t i o n
l jedica t i on
Acknowledgement
A b s t r a c t
Table o f Conten*
L i s t Of Tables
L i s t . Of F igures
CHAPTER ONE
I n t r o d u c t i o n
Sta tement Of Problems
Sta tement Of Objec t ives /Purpose Of Study
S i g n i f i c a n c e O f S tudy
Methodology
Scope Of Study
Background In format ion On Study Area
D e f i n i t i o n Of Key Terms
CHAPTER TWO
PAGE -. ..
i
i i
iii
i v
v
v i
v i i
REVIEW OF RELATED LITERATURE - Concept Of F e a s i b i l i t y And V i a b i l i t y Appra i s a l 12-14
F e a s i b i l i t y I n d i c a t o r s 14-19
The Need For F e a s i b i l i t y And V i a b i l i t y Appra i s a l 20-21 I 1
F e a s i b i l i t y j v i a b i l i t y Appra i s a l P rocess 21-23 1 !
Stages Of P r o j e c t F e a s i b i l i t y Ana lys i s 23-28
2.6 Assess ing The D e s i r a b i l i t y Of An Investment
2.7 B r i e f H i s t o r y O f E a r l y Soap Making
2.8 Soap I n d u s t r y I n N i g e r i a
2 . 9 Problems Facing Local Manufacture Of Soap In '
N i g e r i a
2.10 N i g e r i a ' s Raw M a t e r i a l s P o t e n t i a l For Soap
Produc t ion
2 . il Importance Of Small S c a l e E n t e r p r i s e
2 . 1 2 Problems O f Small Bus iness E n t e r p r i s e s In
N i e r i a
References
CHAPTER THREE
3 . 0 RESEARCH METHODOLOGY - 3.1.1 Freambie
3.12 Research Design
3 .1 .3 D a ' t i i S e l ec t i on /Sou rce s Of Date
5.1.4 Sample S i z e And Procedures
3.1.4.1 Piiot Sample
3.1.5 Sampl.ing Method
3 .1 .6 Nature Of Data Anajkysis
3.17 R e l i a b i l i t y Of Data
References
CHAPTER FOUR --
4 . 0 DATA PRESENTATION AND ANALYSIS
4 .1 Data P r e s e n t a t i o n
4 . 2 Data Ana lys i s
CHAPTEK FIVE - THE FEASIBILITY STUDY A N D APPRAISAL %PORT
P r o j e c t Summary And Recommendations
Preamble
P r o j e c t Background/History
Market And P l a n t Capac i ty
M a t e r i a l s And I n p u t s
Locat ion And S i t e
P r o j e c t Engineer ing
P l a n t Organ i s a t ion And Overhead Cost
Manpower Requirement
Implementat ion Schedula i n g
5.10 F i n a n c i a l And Economic Eva lua t i on
5.11 S o c i a l B e n e f i t E f f e c t
6 . 0 CHAPTER SIX
6.1 Summary Of F ind ings And Conclusion
Appendix
Bib l iography
LIST OF TABLES
.4.1-4.7 A n a l y s i s Of Resea rch Q u e s t i o n a i r e s
PAGE
51-62
5 . 1 E s t i m a t e d Cos t Of Annual ... Raw M a t e r i a i s 8 1
, 5.2 Machinery And Equipment C o s t Requirement 88 . 5 . 5 P roposed Schedu le Of P r o d u c t i o n 97
5.4 Requ i red . I n d u s t r i a l Land Area 100
5 . 5 Overhead Cost Requirement (Annual) 1 0 3
5 . 6 Manpower Requirement , Cos t F o r e c a s t 107
5 .7 F o r e c a s t O f P r o j e c t lmplement&ion Schedu le 109 ,
5 . 8 Working C a p i t a l E s t i m a t e 1 1 0
5.9 E s t i m a t e O f T o t a l I n i t i a l P r o j e c t Cost 1 1 2
5 .10 E s t i m a t e d I n t e r e s t s And Bank Charges 115
5 .11 F o r e c a s t Annual D e p r e c i a t i o n 116
5.12 F o r e c a s t P r o f i t And Loss Account
5 .13 F o r e c a s t O f Cash Flow P r o j e c t i o n s
5 .14 Ba lance S h e e t P r o j e c t i o n s
5 .15 Rayback P e r i o d
LIST OF FIGURES '
2 . 1 P ro j e c t F e a s i b i l i t y Ana ly s i s Flow Char t 2 4 A
5 .1 D i s t r i b u t i o n Channel
5.2 Recommended i nven to ry Con t ro l Card
5 .3 K e t t l e For Soap Making
5.4 b a t c h Reactor For Soap -Making
5 .5 Produc t ion Flow Char t
5.6 P l a n t Layout
b. 7 O r g a n i s a t i o n a l S t r u c t u r e
CHAPTER ONE
1.1 INTRODUCTION
One o f t h e problems o f a s u c c e s s f u l i n d u s t r i a l i s a t i o n
i n deve lop ing c o u n t r i e s i s undoubtedly , t h e l a c k o f
knowledge o f how t o f o r m u l a t e a p r o j e c t i n such a way
t h a t f t s p o t e n t i a l p r o f i t a b i l i t y e i t h e r from t h e p u b l i c
o r p r i v a t e view p o i n t can be e s t i m a t e d on a f i r m b a s i s .
A p r o j e c t p a s s e s th rough many phases from t h e t ime
i t i s f i r s t i d e n t i f i e d a s p o t e n t i a l l y a t t r a c t i v e u n t i l
i t goes i n t o o p e r a t i o n . Thus, p r o j e c t s which a r e t h e
proposed s o l u t i o n s t o problems go from one phase t o
a n o t h e r a s t h e y evo lve from i d e a t o f r u i t i o n . A t any o f t h e
v a r i o u s p h a s e s , t h e t e c h n i q u e s o f p r o j e c t a p p r a i s a l s can
be a p p l i e d t o s e e whether some a s p e c t s have been o v e r -
looked , whether some more a t t r a c t i v e a l t e r n a t i v e has
been deve loped , o r whether more d e t a i l e d c a l c u l a t i o n o f
t h e c o s t s and b e n e f i t s t h a n were p o s s i b l e e a r l i e r have
made t h e p r o j e c t l e s s d e s i r a b l e t h a n ' i t appeared i n t h e
f i r s t p l a c e .
P r o j e c t a n a l y s i s c o n s t i t u t e s an i m p o r t a n t a s p e c t
o f inves tment d e c i s i o n p r o c e s s . I t s scope i s l i m i t e d t o
two t y p e s o f q u e s t i o n s . F i r s t l y , it shou ld h e l p d e c i d e if i t i s p r a c t i c a b l e and worth w h i l e committ ing r e s o u r c e s
t o a p r o j e c t . Secondly it s h o u l d a s s i s t i n d e t e r m i n i n g which
among. a group o f p r o j e c t s t o s e l e c t . p r o j e c t a n a l y s i s
2
has;, two b a s i c dimensions. F i r s t l y , t h e assessment o f
t h e chances o f i t s . s u c c e s s f u l implementa t ion and second1.y
appra i sa l . o f t h e c o n t r i b u t i o n of t h e p r o j e c t t o g iven
goa l s . These two a s p e c t s a r e r e f e r e d t o a s f e a s i b i l i t y
and v i a b i l i t y a p p r a i s a l .
F e a s i b i l i t y a p p r a i s a l i s concerned w i t h p r a c t i c ' a -
b i l i t y , whereas v i a b i l i t y r e f e r s t o t h e wor thwhi leness
of t h e p r o j e c t . The need f o r p r o j e c t o r inves tment a n a l y s i s a r i s e s
from t h e s c a r c i t y o f r e s o u r c e s which i s a t t h e r o o t o f
most o r g a n i s a t i o n a l d e c i s i o n s . The a t t a i n m e n t o f
o r g a n i s a t i o n a l o b j e c t i v e s i s a p roce s s i n v o l v i n g t h e
a l l o c a t i o n o f r e s o u r c e s between money s p e n t i n 'we way
t o b e t t e r ach ieve one o b j e c t i v e and t h a t s p e n t i n
ano the r way t o ach ieve ano the r o b j e c t i v e . Once t h i s
b a s i c concept of r e s o u r c e a l l o c a t i o n i s unders tood , t h e
e s s ence o f p r o j e c t e v a l u a t i o n can t h e n be a p p r e c i a t e d .
S ince r e s o u r c e s a r e l i m i t e d , t h e y must be p u t
t o t h e most e f f e c t i v e u s e s . The pupose o f p r o j e c t
a n a l y s i s i s t o ach ieve t h i s end by making a s s u r e a s
t h e c i rcumstances pe rmi t t h a t t h e p r o j e c t i s t e c h n i c a l l y
sound, t h a t it w i l l p rov ide a r e a sonab l e economic and ,
where a p p r o p r i a t e f i n a n c i a l r e t u r n , t h a t i t s o b j e c t i v e
cannot be ach ieved i n some l e s s c o s t l y way, and t h a t i t
f i r s i n w i t h t h e o v e r a l l o b j e c t i v e s o f t h e o r g a n i s a t i o n .
Having c o n s i d e r e d t h e v e r y impor tance o f s o a p
t o v i r t u a l l y e v e r y househo ld i n t h e i r d a i l y wash ing ,
l a u n d r i n g and b a t h i n g and t h e economic and f i n a n c i a l
b e n e f i t s o f s e t t i n g up s m a l l s c a l e i n d u s t r i e s i n o u r
r u r a l a r e a s , t h i s s t u d y h a s beon chosen t o d e t e r m i n e
and a s c e r t a i n t h e t e c h n i c a l f e a s i b i l i t y , economic
v i a b i l i t y and s o c i a l p r o f i t a b i l i t y o f e s t a b l i s h i n g a
small s c a l e s o a p m a n u f a c t u r i n g i n d u s t r y i n Ahiazu Mbaise
Local Government Area o f Imo S t a t e .
1 . 2 -- STATEMENT OF PROBLEMS
Many l a r g e and s m a l l s c a l e i n d u s t r i a l ' i n v e s t o r s
and o p e r a t o r s f a i l t o r e a l i s e t h e i r o b j e c t i v e s because
no p r o p e r f e a s i b i l i t y and v i a b i l i t y s t u d i e s were c a r r i e d
o u t . Some o f t h e s e p r o j e c t s e s p e c i a l l y s m a l l s c a l e
i n d u s t r i e s were j u s t embarked upon because o p e r a t o r s
f e e l t h e r e i s market' demand f o r t h e p r o d u c t s and t h e y
c o u l d g e t enough fund t o e x e c u t e - ? t h e p r o j e c t . E v e n t u a l l y ,
many o f t h e s e v e n t u r e s a r e a b a n d o n e d l a f t e r p l u n g i n g i n
huge amount o f money.
A p a r t from t h e problems i n h e r e n t i n t h e f o r e -
c a s t s o f f u t u r e c o s t s and b e n e f i t s , t h e ma jo r s o u r c e
o f wrong d e c i s i o n s i n p r o j e c t management and e x e c u t i o n
a r e t r a c e a b l e back t o t h e f a i l u r e t o a t t a c h r e c o g n i t i o n
t o t h e impor tance o f b o t h f e a s i b i l i t y and v i a b i l i t y
a p p r a i s a l s . Some d e v e l o p e r s Qr p r o m o t e r s , o u t o f
s h e e r ignorance o r o v e r optiinism assume f e a s i b i l i t y
o f a p r o j e c t and p roceed t o s e e k t o e s t a b l i s h v i a b i -
l i t y o n l y t o f i n d o u t , a f t e r l a b o u r o u s , t ime consuming
o r c o s t l y e x e r c i s e s t h a t tIje9- have n o t g iven any o r '
s u f f i c i e n t t h o u g h t t o f e a s i b i l i t y and a s a r e s u l t f i n d
themse lves p lunged i n t o s i g n i f i c a n t l o s s e s o r c a t a s t r o -
p h i c r e s u l t s , some e s p e c i a l l y t h o s e who have t h e money
may assume comple te f e a s i b i l i t y and p roceed w i t h t h e
r o s y e x p e c t a t i o n o f v i a b i l i t y . They e i t h e r make
incompetent and d i s t o r t e d v i a b i l i t y a p p r a i s a l t h e r e b y .
m i s s i n g t h e o p p o r t u n i t y o f d o i n g b e t t e r w i t h t h e funds
a v a i l a b l e , o r run up a g a i n s t l e g a l o r t e c h n o l o b l ~ a l
o b s t a c l e s o rexceed t h e t ime p e r m i t t e d t o e x e c u t e t h e
p r o j e c t . Some may have b l u r r e d view of b o t h f e a s i b i l i t y
and v i a b i l i t y a p p r a i s a l b u t a r e i n f a c t n o t competent
t o c a r r y o u t p r o p e r f e a s i b i l i t y and v i a b i l i t y a p p r a i s a l s .
They n o n e t h e l e s s , p roceed w i t h o u t making u s e o f compe-
t e n t p r o f e s s i o n a l s e r v i c e s and i n s o d o i n g t h e y pay a
v e r y heavy p e n a l t y i n c u r r i n g d e v a s t a t i n g l o s s e s o r i n a - t
I, dequa te r e t u r n s .
1 . 3 STATEMENT OF OBJECTIVES/PURPOSE OF STUDY -- -.
The fundamenta l o b j e c t i v e o f t h i s f e a s i b i l i t y s t u d y
i s t o a s c e r t a i n t h e t e c h n i c a l f e a s i b i l i t y , . economic
v i a b i l i t y and s o c i a l p r o f i t a b i l i t y o f e s t a b l i s h i n g a
s m a l l s c a l e soap m a n u f a c t u r i n g i n d u s t r y i n Ahiazu Mbaise
L . G . A . of Pmo S t a t e .
a d d i t i o n t o t h i s , o t h e r o b j e c t i v e s i n c l u d e :
To d e m o n s t r a t e t h e r o l e o f f e a s i b i l i t y s t u d y and
v i a b i l i t y a p p r a i s a l i n d e c i s i o n making i n i n d u s t r i a l
p r o j e c t s .
To c r e a t e awareness on t h e need f o r f e a s i b i l i t y and
v i a b i l i t y a p p r a i s a l on t h e e s t a b l i s h m e n t o f s m a l l s c a l e
i n d u s t r i a l p r o j e c t s which h a s
a t t e n t i o n i n t h e p a s t .
been g i v e n l i t t l e o r no
To i l l u s t r a t e t h e p r i n c i p l e and a p p l i c a t i o n ? o f
f e a s i b i l i t y and v i a b i l i t y s t u d y i n s m a l l s c a l e i n d u s t r i a l
p r o j e c t s .
F i n a l l y , t o make recommendations based *on f i n d i n g s
from t h e s t u d y on f u t u r e i n d u s t r i a l p r o j e c t i n v e s t m e n t ,
devel.oment o r e s t a b l i s m e n t .
1 . 4 SIGNIFICANCE OFSTUDY
T h i s s t u d y h a s f a r r e a c h i n g s i g n i f i c a n c e t o b o t h
i n v e s t o r s and d e v e l o p e r s o f i n d u s t r i a l p r o j e c t s e s p e c i a l l y
s m a l l s c a l e i n d u s t r i a l p r o j e c t p romote r s .
I t w i l l b r i n g t o f o r e t h e d e s i r e d need f o r p r o p e r
f e a s i b i l i t y and v i a b i l i t y a p p r a i s a l b e f o r e t a k i n g
i n v e s t m e n t d e c i s i o n s i n f u t u r e t o a v o i d embarking on
w a s t e f u l v e n t u r e s e s p e c i a l l y i n a r e c e s s i v e economy l i k e
o u r s .
I n t h e academic f i e l d , i t i s i n t e n d e d t o s e r v e
a s a r e f e r e n c e work t o s t u d e n t s i n t e n d i n g t o embark
on r e s e a r c h s t u d y i n t h i s a r e a i n f u t u r e .
1 . 5 METHODOLOGY
The methodology f o r t h i s s t u d y w i l l be d e s i g n e d
and e l a b o r a t e d u s i n g q u e s t i o n a i r e , o b s e r v a t i o n , o r a l
i n t e r v i e w , r e v i e w o f r e l a t e d works i n t h e p a s t .
Also t h e s t u d y o f market a n a l y s i s and a p p l i c a t i o n o f
v a r i o u s t e c h n i q u e s t o q u a n t i f y t h e v i a b i l i t y w i l l h e l p
i n making t h e r e s e a r c h more s u c c e s s f u l . The a n a l y s i s
d e r i v e d from d a t a c o l l e c t e d w i l l be u s e d i n d e t e r m i n i n g
how f e a s i b l e and v i a b l e t h e p r o j e c t w i l l b e .
Data c o l l e c t i o n w i l l be t h r o u g h b o t h p r i m a r y and
secondary s o u r c e s . P r imary d a t a w i l l i n c l u d e u s e o f
q u e s t i o n a i r e s on p o t e n t i a l consumers , o r a l i n t e r v i e w
and f i e l d s u r v e y o f t h e l o c a t i o n a l s i t e . While secondary
d a t a w i l l be c o l l e c t e d from r e l a t e d l i t e r a t u r e s , books ,
magazines newspapers and p a s t r e s e a r c h works on t h e
a r e a o f s t u d y .
1 . 6 SCOPE OF STUDY
T h i s s t u d y i s conce rned s t r i c t l y w i t h t h e f e a s i b i -
l i t y and v i a b i l i t y a p p r a i s a l o f e s t a b l i s h i n g a s m a l l
s c a l e soap m a n u f a c t u r i n g i n d u s t r y i n Ahiazu Mbaise L . G . A,
Imo S t a t e . The s t u d y i s i n t e n d e d t o r e v o l v e around t h e
7
t e c h n i c a l f e a s i b i l i t y economic v i a b i l i t y and s o c i a 3
p r c f i t a b i l i t y o f e s t a b l i s h i n g t h e smal l s c a l e i n d u s t r y .
For t h e purpose of t h i s s t udy t h e r e s e a r c h w i l l cover
mainly consumers i n t h e Local Governemnt Area whi le
t h e product proposed f o r t h e i n d u s t r y w i l l ex tend beyond
t h e s tudy a r e a . I t w i l l a l s o make recommendations
based on i t s f i n d i n g s on smal l s c a l e i n d u s t r i a l p r o j e c t
e s t ab l i shmen t i n f u t u r e .
1 . 7 BACKGROUND INFORMATION OF STUDY AREA
BACKGROUND
The Ahiazu Mbaise Local Government Area was
c r e a t e d i n 1 9 7 6 by t h e f u s i o n o f Ahiara and Ekwerazu
c l a n s o f t h e former Mbaise Local Government Area.
There a r e f o u r t e e n autonomous communities i n t h e a r e a ,
e i g h t i n Ahiara and s i x i n EKwerazu.
LOCATION
Ahiazu Mbaise Local Government Area i s bounded
on t h e n o r t h by t.he I s i a l a Mbhno and Ehime Mbano Local
Government Areas; on t h e e a s t by I h i t t e Uboma and Obowo
Local Government Areas. The a d m i n i s t r a t i v e headqua r t e r s
i s l o c a t e d a t Afor Oru.
POPULATION AND SIZE
The Local government a r e a covers an a r e a o f approxi-
mately one hundred and seven (107) square lcil.ometers,
8
and accord ing t o t h e 1991 census has a p o p u l a t i o n of
one hundred and f o r t y seven thousand (147,000) i n h a b i -
t a n t s . ' l 'his f i g u r e i s however no t a r e f l e c t i o n o f t h e
t o t a l number o f peop le i n Ahaizu Mbaise L . G . A , s i n c e a
l a r g e p r o p o r t i o n o f t h e ind igenes were r e s i d i n g o u t s i d e
t h e l o c a l governma$. a r e a a t t h e t ime o f t h e census .
The t r u e p o p u l a t i o n i s i n r h e neighbournood o f two
hundred and f o r t y thousand (240,000) based on a 2 . 5 %
annual growth r a t e o f t h e 1963 census of 118,080.
ECONOMY
AGKI CULTURE :
A m a j o r i t y o f t h e peop l e o f t h i s l o c a l government
a r e a a r e s u b s i s t e n t f a rmers . T h e i r p r o d u c t s i n c l u d e
palm o i i , palm k e r n e l , c a s sava and a l l i e d p roduc t s e t c .
The l o c a l government a d m i n i s t r a t i o n has an agro-based
s e rv i . g s c e n t r e a t t h e h e a d q u a r t e r s which servt is a s a depot
f o r d i s t r i b u t i o n o f proved s e e d s , s e e d l i n g s , f e r t ili-
z e r s e t c . The a d m i n i s t r a t i o n ma in t a in s a f i f t e e n h e c t a r e
demons t ra t ion farm a t I h i t t e Ubi. Ahiazu i s b l e s s e d w i th
l a r g e number o f . p r i v a t e fa rmers who a r e s p e c i a l i z e d i n .
p a h p i a n t a t i o n , p o u l t r y fa rmers e t c .
INDUSTRIES :
Ahiazu i s a r u r a l cum i n d u s t r i a l c e n t r e . A number
o f i n d u s t r i e s o p e r a t e a t d i f f e r e n t communities i n t h e a r e a .
9
Prominent among them a r e Dana i l s I n d u s t r i e s , and Cassa
Paper M i l l s a t ogb'e Ah ia r a , Dona Motors a t (.:Eke Ah ia r a ,
Barnax Engineer ing Company Ltd a t I h i t t e a fo rukwu and
Sep t a Shoe I n d u s t r y a t O k i r i k a Nweke. There i s a l s o a ' - .
soap and cand l e i n d u s t r y i n t h e 2oca l . government and
t h e e x p l o r a t i o n of t h e p o s s i b i l i t y o f s e t t i n g up a s p r i n g
wa t e r b o t t l i n g i ndus t ry - -ba sed on t h e wa t e r from t h e
famous Lake Nwaegbeneru at.Umununo Ih i t t e a fo rukwu .
P roposa l s have a l s o been completed f o r t h e e s t a b l i s h m e n t
o f more agro-based i n d u s t r i e s i n t h e a r e a .
COMMERCE : /
Many ind igenes o f Ahiazu L . G . A a r e migran t bus ine s s -
men and workers and r e s i d e o u t s i d e t h e l o c a l government I
a r e a . They l i v e and do t h e i r b u s i n e s s i n b i g c i t i e s
o u t s i d e t h e s t a t e and even o u t s i d e t h e coun t ry such
people r e t u r n t h e i r e a r n i n g s t o Ahiazu and have been
i n s t r u m e n t a l i n opening up c o t t a g e i n d u s t r i e s , supe r -
markets and o t h e r b u s i n e s s v e n t u r e s which a r e now ,
transfbrming Ahiazu L.G.A. i n t o an i n d u s t r i a l ne rve
c e n t r e o f t h e s t a t e .
The l o c a l government a d d i n i s t r a t i o n ha s embarked
on t h e development o f t h r e e r e g i o n a l markets namely:-
Afor-Oru, Afor-Ogbe and Nkwoala Umuokirika. The f i r s t
two have been developed a t a c o s t o f 4yer N 2 . 3 mi l l i -on .
10
The t h i r d . i s y e t t o be brought t o t h e s t a t e o f t h e
o t h e r two. There a r e a l s o o t h e r b i g marke t s i n
d i f f e r e n t p a r t s 6 f t h e l o c a l government a r e a .
The co -ope ra t i ve and Commerce Bank and t h e P rog re s s
Bank PLC a r e , t h e two Commercial Banks t h a t o p e r a t e
t h e r e p r e s e n t l y . There a r e a l s o f o u r community banks
l o c a t e d a t Afor-Oru, Afor-Ogbe) Umuokirika and Mpam
which r e n d e r f i n a n c i a l h e l p t o sma l l s c a l e i n d u s t r i a l -
i s t s and t r a d e r s i n t h e a r e a .
1 . 8 DEFINITION OF KEY TERMS
FEASIBILITY
This answers t h e q u e s t i o n ; can i t be done?, I t i s
concerned w i t h t h e p r a c t i c a b i l i t y o r p o s s i b i l i t y o f
t h e v i s u a l i s e d o r contemplated d e c i s i o n whether on
developmental pro3 e c t , p l ann ing scheme, r e s o u r c e
inves tment p roposa l e t c .
VIABILITY
While f e a s i b i l i t y answers t h e q u e s t i o n , can i t
done? , v i a b i l i t y a p p r a i s a l answers t h e complementary
q u e s t i o n ; shou ld i t be done? . V i a b i l i t y t h u s e s t a b l i s h e s
whether o r n o t i t i s worthwhile t o t a k e t h e d e c i s i o n
which has a l r e a d y been e s t a b l i s h e d as capab l e o f be ing
t aken .
INVESTMENT
The Oxford Eng l i sh D i c t i o n a r y d e f i n e s inves tment
a s t h e convers ion o f money o r c i r c u l a t i n g c a p i t a l i n t o
some s p e c i e s of p r o p e r t y from which an income o r p r o f i t
i s expec ted t o be d e s i r e d i n t h e o r d i n a r y t r a d e o r
b u s i n e s s . ' Thi s means t h a t inves tment i n v l o v e s p a r t i n g
w i t h some c a p i t a l i n e x p e c t a t i o n o f p r o f i t s o r r e t u r n
i n f u t u r e .
VALUATION -
A w r i t t e n s t a t emen t o r e s t i m a t e o f v a l u e which i s
based on a l o g i c a l a n a l y s i s o f r e l e v a n t i n fo rma t ion
reg .arding a p a r t i c u l a r p r o j e c t o r p r o p e r t y and which i s ?
a l s o made a s a t a d a t e o f i n s p e c t i o n .
APPRAISAL
An e s t i m a t e o r op in ion o f v a l u e . I t i s r egarded a s
t h e a c t o r p r o c e s s o f e s t i m a t i n g va lue . The r e s u l t i n g
op in ion o f va lue d e s i r e d from t h e a p p r a i s a l may be t r a n s -
m i t t e d o r a l l y o r i t may be fo rma l , p r e s e n t e d on w r i t t e n
form.
R E L I A B I L I T Y
Cons i s tency o f r e s u l t when an i n s t rumen t o f
measurement i s r e p e a t e d l y used.
1 2 CHAPTER TWO
2 .0 REVIEW OF RELATED LITERATURE -- This c h a p t e r c o n s i d e r s v i t a l i s s u e s r e l a t e d t o t h e
s t u d y .
2.1 THE CONCEPT OF FEASIBILITY AND VIABILITY - APPRAISAL
Broadly speak ing , f e a s i b i l i t y a p p r a i s a l i s concerned
w i t h t h e fundamental q u e s t i o n o f t h e p r a c t i c a b i l i t y
o r p o s s i b i l i t y o f t h e subJec t m a t t e r o f a proposed
d e c i s i o n be i t development sheme, inves tment p r o j e c t ,
g r a n t of l oan and s o on. I t i s r egarded a s v a r i o u s
p rocedures which could be used g e n e r a l l y by d i f f e r e n t
p r o f e s s i o n a l s i n c a r r y i n g o u t t h e i r p r o j e c t t a s k . A
success fu l . f e a s i b i l i t y a p p r a i s a l can be ach ieved i f t h e
i n t e n d i n g u s e r o f t h e t e chn ique has an i d e a o f what
f e a s i b i l i t y i s a l l abou t .
To.:::some p r o f e s s i o n a l s i n t h e p a s t , f e a s i b i l i t y
means p r o j e c t e v a l u a t i o n , market s t u d y o r m a r k e t a b i l i t y . -
a n a l y s i s . Others c a l l f e a s i b i l i t y t o mean c o s t b e n e f i t
a n a l y s i s o r economic s t u d y o f a p r o j e c f , These v a r i e t i e s
of i d e a s brought confus ion on what t h i s system o f i d e n t i t y
l a b e l l e d on f e a s i b i l i t y cou ld actuaU$mean.
Young (1970) P.337 i n t r y i n g t o c l e a r t h e confus ion
d e s c r i b e d f e a s i b i l i t y s t u d y a s : -
"That which i s r e g a r d e d a s p r o v i d i n g
i n v e s t o r s w i t h t h e l i k e l y economic
r e s u l t s o f s e l f s u s t a i n i n g r e a l e s t a t e
The economic r e s u l t s c o u l d be aimed a t by s i m p l e
comparison o f c o s t w i t h v a l u e . A w e l l conduc ted
market s t u d y w i l l g i v e an o v e r a l l i m p r e s s i o n t o a r e a s
where i n v e s t m e n t s w i l l g a i n o r l o s e t h e r e b y c r e a t i n g
an o p p o r t u n i t y f o r i n v e s t o r t o a v o i d p o s s i b l e f a i l u r e
i n t h e i r v e n t u r e s . O r whenever t h e f e a s i b i l i t y a p p r a i s a l
g i v e s p o s i t i v e s i g n , t h e r e i s an i n d i c a t i o n t h a t s u c c e s s
i n e n c o u n t e r i n g r e t u r n c a p i t a l w i l l . be p o s s i b l e .
P r o f e s s o r Ume (1977) P.42 c l e a r e d d o u b t s on t h e
a c t u a l concep t o f f e a s i b i l i t y and w r o t e ,
"PTojec t f e a s i b i l i t y h a s t o do w i t h p r a c t i c a b i l i t y
and v i a b i l i t y w i t h . t h e -:worthwhileness:'2 T h i s i n v o l v e s
th .e a c t o f c a r r y i n g o u t t e s t t o khow w h e t h e r a known
, p r o j e c t can p h y s i c a l l y be implemented t h e r e b y s e c u r i n g ,
a d e q u a t e r e s u l t . I
P r o f e s s o r Ume i n c o n c l u s i o n f u r t h e r s a i d t h a t , i 1 :
f e a s i b i l i t y a p p r a i s a l answers t h e q u e s t i o n : Can i t b e
done '
A f e a s i b i l i t y r e p o r t which i s e s s e n t i a l l y a n '
e x p r e s s i o n o f e x p e r t o p i n i o n on whether o r n o t t h e
a c t i o n i.s c a p a b l e o f b e i n g pursued may t a k e t h e form
o f a w r i t t e n r e p o r t s u b m i t t e d s e p a r a t e l y t o t h e d e c i s i o n
maker o r i n c o r p o r a t e d a s an i n t e g r a l p a r t o f a w r i t t e n
document embracing b o t h f e a s i b i l i t y and v i a b i l i t y o r i n
o f t h e form,oral a d v i c e . Tn p r a c t i c e , a f e a s i b i l i t y r e p o r t
i s o f t e n an amalgam of a number o f s u b - r e p o r t s d e a l i n g
w i t h t h e va rous f e a s i b i l i t y i n d i c a t o r s and which a r e
f i n a l l y assembled by a c o - o r d i n a t i n g p r i n c i p a l a p p r a i s e r
o r a consor t ium o f a p p r a i s e r s who have c o n s u l t e d and
i n c o r p o r a . t e d t h e i r f i n d i n g s and o t h e r c o n s u l t a n t s i n t o
an i n t e g r a l whole forming t h e f e a s i b i l i t y r e p o r t .
2 . 2 FEASIBILITY INDICATORS
A s a l r e a d y i n d i c a t e d , f e a s i b i l i t y i s concerned
w i t h t h e fundamenta l q u e s t i o n o f p r a c t i c a b i l i t y o r
p o s s i b i l i t y o f t h e v i s u a l i s e d o r contempaated d e c i s i o n be
i t on a development p r o j e c t , p l a n n i n g scheme, r e s o u r c e I
u s e and inves tmen t p r o p o s a l e t c .
Thus, i n p r o j e c t d e c i s i o n v a l u a t i o n , f e a s i b i l i t y 1
I
a p p r a i s a l answers t h e q u e s t i o n ; can i t be done? . I n o r d e r I
t o answer t h e q u e s t i o n as t o whe the r something c o u l d
be done, a number o f r e l e v a n t o r a s s o c i a t e d q u e s t i o n s
1vhj.c.h we may c a l l f e a s i b i l i t y i n d i c a t o r s .and whose
answers would add up t o t h e o v e r a l l f e a s i b i l i t y o r
non f e a s i b i l i t y of t h e p a r t i c u l a r a c t i o n contemplated,
should be asked. The q u e s t i o n s t o be asked and
answered depend upon t h e n a t u r e o f t h e d e c i s i o n t o be
made. S i m i l a r l y t h e number and p r o f e s s i o n a l background
of t h o s e who would frame o r answer t h e q u e s t i o n s a l s o
depend on what i s be ing decided.
Most f e a s i b i l i t y a p p r a i s a l s answer t h e ques t i ons
which come w i t h i n t h e s i x p r i n c i p a l c o n s i d e r a t i o n s on
t he fol lowing f e a s i b i l i t y i n d i c a t o r s m d
TECHNOLOGICAL FEASIBILITY
The f i r s t q u e s t i o n o r i s s u e which i p r o j e c t d e c i s i o n
maker and h i s p r o f e s s i o n a l a d v i s e r should concern
themselves wi th i s whether t h e p r o p o s a l , p r o j e c t o r
sheme i s capable of r e a l i s a t i o n w i t h i n t h e l i m i t s of
e x i s t i n g t echno log ica l knowledge and a v a i l a b l e l abour
fo rce and s k i l l .
Technological f e a s i b i l i t y i s no t concerned so much
wi th s o much i s s u e s a s t h e advantages of a l t e r n a t i v e
t echno log ica l methods of execu t ing t h e proposed
p r o j e c t o r scheme a s w i th t h e r a d i c a l q u e s t i o n of
whether o r no t i t i s p o s s i b l e o f r e a l i s a t i o n w i t h i n
t h e f o r e s e e a b l e f u t u r e wi th t h e e x i s t i n g and o b t a i n a b l e
s tock o f technol.ogica1 knowledge and s k i l l .
PHYSICAL FEASIBILITY
P h y s i c a l f e a $ b i l i t y c o n s i d e r s such impor ta .n t i s s u e s
a s s u i t a b i ) l i t y o f t h e s i t e and t h e c l i m a t e . " s i b e s u i t a b -
i l i t y i s a wide s u b j e c t and may be examined i n t e rms o f
s o i l s t r e n g t h , c h a r a c t e r , t o p o g r a p h i c a l c o n s i d e r a t i o n s .
P h y s i c a l f e a s i b i l i t y embraces l o c a t i o n a l f e a s i b i l i t y .
A c c e s s i b i l i t y a l s o comes i n t o i t . P h y s i c a l f a c t o r s do n o t
o n l y a f f e c t f e a s i b i l i t y o f p r o j e c t s and d e c i s i . o n s d i r e c t l y
b u t a l s o i n d i r e c t l y . For example, p h y s i c a l c i r c u m s t a n c e
may c o n d i t i o n economic f e a s i b i l i t y : . f f t h e y f o r example,
i n h i b i t t h e p r o d u c t i o n o r i m p o r t a t i o n o f any o r o f an . .'
a d e q u a t e s u p p l y o f n e c e s s a r y raw m a t e r i a l s .
ECONOMIC FEASIBILITY
Economic f e a s i b i l i t y a p p r a i s a l i s l a r g e l y c o n ~ e r l ~ e d
w i t h t h e fundamenta l i s s u e o f whe the r t h e p r o j e c t d e c i s i o n
can be t a k e n under t h e b road p r e v a i l i n g o r f o r e s e e a b l e
economic env i ronment . I t i s f o r i n s t a n c e , n e c e s s a r y a t
t h i s j u n c t u r e t o c o n s i d e r - :whether t h e known economic
r e s o u r c e s a v a i l a b l e w i t h i n t h e c o u n t r y o r o b t a i n a b l e
from s o u r c e s o u t s i d e t h e c o u n t r y can s u p p o r t t h e contemp-
l a t e d p r o j e c t o r scheme. There i s a l s o t h e need t o
c o n s i d e r a t t h i s s t a g e , t h e b r o a d i s s u e o f demand f o r
t h e p r o d u c t o f t h e p r o d u c t t h e p roposed development
i n c l u d i n g a q u a n t i t a t i v e a n a l y s i s of t h e s c a l e and p a t t e r n
i n o r d e r t o e s t ab1 i sh : the demand t r e n d .
LEGAL FEASIBILITY
Legal f e a s i b i 1 i . t ~ c o n s i d e r s t h e b r o a d l e g a l i t y
o f t h e p r o p o s a l , p r o j e c t o r scheme. For i n s t a n c e , one
s h o u l d f i n d o u t , i n r e l e v a n t c a s e s , w h e t h e r t h e town
p l a n n i n g and o t h e r r e g u l a t i o n c o n t r o l l i n g l a n d u s e and
b u i l d i n g development i n t h e a r e a i n q u e s t i o n w i l l
p e r m i t t h e a c t i o n p roposed f o r t h e s i t e and v i c i n i t y
chosen .
I n m a n u f a c t u r i n g and o t h e r b u s i n e s s e s , one s h o u l d
n o t o n l y e n s u r e t h a t t h e p r o p o s a l w i l l n o t contYauege
t h e l a w s o f t h e l a n d b u t w i l l a l s o o b t a i n t h e s u p p o r t
of t h e law where r e l e v a n t .
I n t h e s e days o f awakening, g e n e r a l e n v i r o n m e n t a l
r e s p o n s i b i l i t i e s , l e g a l c o n s i d e r a t i o n s s h o u l d n o t s t o p
a t w h e t h e r t h e main o b j e c t i v e can be a c h i e v e d w i t h i n
t h e law b u t s h o u l d e x t e n d t o whe the r t h e law w i l l p e r m i t
t h e p r o p o s a l s f o r t r e a t m e n t o r d i s p o s a l o f w a s t e s i n
a p p r o p r i a t e c a s e s .
Lega l f e a s i b i l i t y i s n o t s o much conce rned w i t h
t h e l e g a l i t y o f such i s s u e s a s t h e d e t a i l s o f t h e
v a r i o u s d e s i g n s , m a t e r i a l s and c o n s t r u c t i o n b u t e s s e n t -
i a l l y 'with b road l e g a l i t y o f t h e c o n t e m p l a t e d a c t i o n .
FINANCIAL FEASIBILITY -- F i n a n c i a l c o n s i d e r a t i o n i s no doubt 'a p a r t o f t h e
1.8
wider economic. i s s u e . I t ha s , however, been i s o l a t e d
and t r e a t e d s e p a r a t e l y h e r e i n o r d e r t o emphasize i t s . .
importance i n d e c i s i o n v a l u a t i o n of p r o j e c t s o r schemes.
P a r t of i t s g r e a t importance d e r i v e s from t h e f a c t
t h a t most development p r o j e c t s o r investment schemes
a r e c a r r i e d ou t w i th p a r t l y borrowed c a p i t a l .
Financing w i l l a l s o determine t h e t im ing , , phas ing and
s c a l e of o p e r a t i o n s . I t w i l l a l s o i n f l u e n c e t h e
marketing p o l i c y f o r t h e f i n i s h e d produc ts .
The f i n a n c i a l c o n s i d e ~ a t i o n involved a t t h e f e a s i -
b i . l i t y s t a g e i s no t so much concerned wi th such m a t t e r s
a s t h e a p p r a i s a l of t h e c o s t of funds o r t h e r e t u r n s
expected from c a p i t a l o u t l a y as it i s wi th t h e funda-
mental i s s u e of a v a i l a b i l i t y o f funds i n t h e f i r s t p l a c e :
A t t h e f e a s i b i l i t y s t a g e t h e r e f o r e , t h e f i n a n c i a l
q u e s t i o n s should be c o n f i n e d ' t o t h e b a s i c and major
i s s u e s of t h e broad e s t i m a t e s of t h e t o t a l f i n a n c i a l
requirements and t h e source of funds . I t should be
concerned wi th whether o r no t enough funds can be
mobi l i sed from any source - i n t e r n a l , e x t e r n a l , pe r sona l
borrowed, p r i v a t e , p u b l i c o r i n s t i t u t i o n a l t o execu te
t h e dec i s ion . I n hhe case o f borrowed fund, t h e r e i s
a l s o t he need t o a p p r i a s e t h e adequacy o r o therwise
of t h e s e c u r i t y which t h e borrower can o f f e r i n o r d e r
t o s ecu re loans .
SOCIO-POLITICAL FEASIBILITY
The s o c i a l and p o l i t i c a l c o n s i d e r a t i o n s i n v o l v e d i n
c e r t a i n inves tmen t o r development p r o j e c t s o r p roposaas
canno t be d i s r e g a r d e d i n feasibility a p p r a i s a l . The (:
e f f e c t s o f s o c i a l and p o l i t i c a l envi ronment and o f t r e n d s
t h e r e o f , and t h e i r r e l e v a n t t o p r u d e n t d e c i s i o n making
canno t be o v e r emphasised. S o c i a l and p o l i t i c a l e l e m e n t s
may n o t o n l y a f f e c t t h e f e a s i b i l i t y o f a p r o j e c t d i r e c t l y
b u t a l s o i n d i r e c t l y th rough t h e changes t h e y may impose
on o t h e r f e a s i b i l i t y i n d i c a t o r s . On t h i s l a t t e r p o i n t ,
war i n a c o u n t r y s u p p l y i n g r a w m a t e r i a l s f o r a p roposed
m a n u f a c t u r i n g i n d u s t r y i n a n o t h e r c o u n t r y may s e r i o u s l y
a f f e c t t h e f e a s i b l i t y o f t h e i n d u s t r i a l p r o j e c t .
Fore ign ownership o r p a r t i c i p a t i o n a a n d such i s s u e s a s
i n d e g e n i s a t i o n p o l i c y a r e some o f t h e r e l e v a n t m a t t e r s
t o c o n s i d e r under s o c i o - p o l i t i c a l f e a s i b i l i t y . P o l i t i c a l
manoeuvres can undermine t h e economic, l e g a l and
f i n a n c i a l f e a s i b l i t 3 e s o f a p r o j e c t .
I t can be b r i e f l y s t a t e d t h a t c e r t a i n p r o j e c t s
which may be f e a s i b l e on f o u r c o u n t s s t a t e d above may
n o t be a t t e m p t e d because o f t h e s o c i a l and p o l i t i c a l
i m p l i c a t i o n s which may make them t o t a l l y unaccep taBle t o
t h e p o l i t i c a l a u t h o r i t y o r s o c i e t y a t l a r g e .
2 . 3 THE NEED FOR FEASIBILITY AND VIABILITY APPRAISAL
I n many d e v e l o p i n g c o u n t r i e s o f t h e w o r l d , w a s t e -
f u l .arid u n v i a b l e p r o j e c t s have been p lunged t n t o by
i n d i v i d u a l s , g roups o r government m e r e l y b e c a u s e t h e
money c o u l d be found e i t h e r from i n t e r n a l o f e x t e r n a l
s o u r c e s . T r a g i c s i t u a t i o n s l i k e t h e s e would be a v e r t e d
by a c l e a r r e c o g n i t i o n o f t h e impor tance and need f o r
and t h e d i f f e r e n c e between f e a s i b i l i t y and v i a b i l i t y
a p p r a i s a l s of p r o j e c t s and e n s u r i n g t h a t b o t h c o u l d b e
a t t a i n e d b e f o r e d e c i s i o n s a r e t a k e n t o v e n t u r e i n t o
i n d u s t r i a l and o t h e r deve lopmenta l p r o j e c t s .
F e a s i b i l i t y and v i a b i l i t y s t u d y and a p p r a i s a l a r e s
o f v i t a l : impor tance i n t h e economic u t i l i z a t i o n o f
r e s o u r c e s . Without t h o r o u h g f e a s i b i l i t y and v i a b i l i t y
a p p r a i s a l p r e c e d i n g t h e u n d e r t a k i n g o f any l a r g e o r
s m a l l s c a l e i n d u s t r i a l p r o j e c t , t h e r e s u l t would
u n q u e s t i o n a b l y b e t h e misuse o f v a l u a b l e r e s o u r c e s i n
one way o r t h e o t h e r .
F e a s i b i l i t y and v i a b i l i t y a p p r a i s a l a l s o p r o v i d e
a r e l i a b l e - pxe-development and p r e - i n v e s t m e n t p l a n n i n g
t o o l f o r , v i r t u a l l y a l l t y p e s o f p r o j e c t s . I t s u s e i n
c o n n e c t i o n w i t h a l l p r o j e c t s and schemes, e s p e c i a l l y
i n d u s t r i a l p r o j e c t s w i l l e n s u r e t h a t o n l y v i a b l e
p r o j e c t s w i l l be fmder t aken . I t a l s o s a v e s i n v e s t o r s
t h e t r o u b l e o f spending energy, t ime , and c a p i t a l on
p r o j e c t s t h a t w i l l n o t pay o f f . I t makes f o r c l e a r ,
coheren t and comprehensive t h i n k i n g and l u c i d expos i -
t i o n of t h e essence o f dec i s ion v a l u a t i o n i f t h e two
b a s i c mmponents a r e r e a l i s e d and kep t i n p roper
p e r s p e c t i v e a l l t h e t ime. Above a l l , i t l e a d s t o a
more competent execu t ion and p r e s e n t a t i o n of p r o j e c t
d e c i s i o n .
I t i s important t h a t f e a s i b i l i t y and v i a b i l i t y - a p p r a i s a l s should be recognised and kep t i n p e r s p e c t i v e
a l l t h e t ime. For one t h i n g , it emphasizes t he g r e a t
range and complex i t i e s of e x p e r t knowledge o r e x p e r t
consu l ta%fons which should be brought i n t o many d e c i s i o n
v a l u a t i o n s i f a worthwhile r e p o r t i s t o emerge.
Secondly i t h e l p s t o emphasize and map ou t and
p r e s e n t t h e f a c t s and f i g u r e s i n a coheren t and l o g i c a l
sequence and i n so doing h e l p s remove o r minimise t h e
muddle i n t h e t h i n k i n g and p r a c t i c e o f many p r o j e c t
a p p r a i s a 3 s r s . Above a l l , i t h e l p s t o avoid i n c u r i n g
expense and c o l l o s a l l o s s e s invo lved i n ven tu r ing i n t o
an a b o r t i v e p r o j e c t .
2 . 4 FEASIBILITY AND VIABILITY APPRAISAL PROCESS
The f e a s i b i l i t y and v i a b i l i t y a p p r a i s a l p roces s i s
an o r d e r l y p recedure i n t h e development o f an e s t i m a t e
of t h e wor thwhi leness o r o t h e r w i s e o f a p r o j e c t .
To make an a p p r a i s a l i s t o s o l v e a problem. The
s o l u t i o n r e q u i r e s i n t e r p r e t a t i o n . ; i n t e rms o f money,
o f t h e i n f l u e n c e s o f econofi ic , s o c i o l o g i c a l , p h y s i c a l
and p o l i t i c a l f o r c e s on a s p e c i f l c p r o j e c t . C h a r a c t e r -
i s t i c s o f i n d u s t r i a l p r o j e c t s d i f f e r t o some e x t e n t .
T h i s however does n o t mean t h a t t h e r e i s a wide v a r i a -
t i o n i n t h e o r d e r l y p r o c e d u r e f o r s o l v i n g a p p r a i s a l
problems. The a p p r a i s a l p r o c e s s i s an o r d e r l y programme
by which t h e p r o j e c t i s i d e n t i f i e d , t h e work n e c e s s a r y
t o s o l v e t h e problem i s p lanned and t h e d a t a i n v o l v e d i s
a c q u i r e d , c l a s s i f i e d , a n a l y s k d and i n t e r p r e t e d i n o r d e r
t o t a k e a d e c i s i b n " 5
The a p p r a i s a l p r o c e s s begi-ns w i t h t h e i d e n t i f i c a t i o n
o f t h e p r o j e c t . I n o t h e r words, it begifis w i t h t h e ' , :
i d e n t i f i c a t i o n o f t h e i n d u s t r i a l p r o j e c t ? . t h a t h a s been
e a r l i e r c o n c e p t u a l i s e d . T h i s i n v o l v e s t h e i d e n t i f i c a -
t i o n o f t h e t y p e o f p r o d u c t t o b e manufac tured by t h e
i n d u s t r y , t h e raw m a t e r i a l i n p u t s , t h e t y p e o f p l a n t s
and machinery , t h e t y p e s o f s t r u c t u r e t h a t w i l l be
adequa te f o r p r o d u c t i o n and a l s o t h e s i t e t h a t w i l l be
most: s h i t s b l e f o r t h e i n d u s t r i a l p r o j e c t . The s i t e
s e l e c t i o n i s v e r y i m p o r t a n t because most. i n d u s t r i a l
: p r o j e c t s r e q u i r e p l a n t s and equipment and i f t h e s i t e i s
n o t s t a b l e enough, it w i l l pose a s e r i o u s problem:.
2 3 .
In o r d e r t o a c q u i r e r e l i a b l e i n fo rma t ion on t h e
above i s s u e s , t h e app rakse r may need t o c o n s u l t o t h e r
p r o f e s s i o n a l s . Th i s w i l l h e l p him t o e s t a b l i s h t h e
f e a s i b i l i t y of t h e p r o j e c t and t h e r e l i a b i l i t y o f t h e
i n fo rma t ion c o l l e c t e d w i Z i go a l ong way t o h e l p i n g t h e
a p p r a i s e r come o u t w i t h a more a c c u r a t e r e s u l t .
A f t e r t h e i d e n t i f i c a t i o n o f t h e p r o j e c t and a l l
i t s a t t r i b u t e s , t h e nex t s t e p i t t o c a r r y ou t a p r e l i -
minary survey. The purpose o f t h i s p r e l i m i n a r y su rvey
i s t o de te rmine t h e c h a r a c t e r , t h e scope and t h e amount
of work i t w i l l t a k e t o c a r r y o u t t h e f e a s i b i l i t y and
v i a b i l i t y s t u d i e s . Th i s w i l l i nvo lve c o l l e c t i . o n o f
d a t a and l a t e r t h e ana3ys i s o f t h e s e d a t a . E a r l y i n t h e
p r e l i m i n a r y su rvey , t h e c h a r a c t e r and amount o f d a t a
which may be r e q u i r e d i n t h e assignment shou ld be
e s t i m a t e d . Th i s w i l l depend on t h e t ype of p r j e c t be ing
app ra i s ed .
2 . 5 STAGES OF PROJECT FEASIBILITY ANALYSIS
The a n a l y s i s o f a p r o j e c t i nvo lve s a c e r t a i n number
o f s t a g e s du r ing which i t s v a r i o u s e lements a r e p r e p a r e d
and examined i n o r d e r t o r e ach d e c i s i o n s . The p r epa ra -
t i o n o f . a p r o j e c t t h e r e f o r e can be seen a s a s e r i e s
of a c t i v i t i e s cu lmina t i ng i n t h e e s t a b l i s h m e n t o f a c e r t a i n
number of s t u d i e s and documents which pe rmi t d e c i s i o n
making.
2 4 .
P r o j e c t f e a s i b i l i t y a n a l y s i s i s conducted i n a
given i n s t i t u t i o n a l frame which determines:. t S s
n a t u r e and t h e number of economic agenc ies l i k e l y t o
be i n t e r e s t e d i n i t . Thus t h e n a t u r e and sequence of
d e c i s i o n s concerning v i a b i l i t y o f t h e p r o j e c t and i t s
f i nanc ing a r e determined by v a r i o u s i n s t i t u t i o n a l p o l i c i e s I. -
a s we l l a s company o b j e c t i v e s . Also, t h e range and accu?: :
racy of in format ion neces sa ry f o r d e c i s i o n making
dur ing d i f f e r e n t s t a g e s o f a p r o j e c t depend on i t s
i nhe ren t c h a r a c t e r i s t i c s such a s s i z e , degree o f
complexity and r i s k . There fore any a t t empt t o d e s c r i b e
a t y p i c a l procedure f o r feasibility a n a l y s i s must be
gene ra l because t h e d e c i s i o n s t o be made and t h e informa-
t i o n r e q u i r e d vary among companies, i n s t i t u t i o n s and
types of p r o j e c t s .
The p roces s o f p r o j e c t f e a s i b i l i t y a n a l y s i s fo l lowing
t h e de te rmina t ion of t h e o b j e c t i v e t o be a t t a i n e d cah be i .'
d iv ided i n t o s t a g e s and s t e p s . Th is i s shown i n t h e
f i g u r e below which i l l u s t r a t e s t h e main s t a g e s and
corresponding flow of t ypes of s t u d i e s needed t o e v a l u a t e
t h e p r o j e c t .
For t h e purpose o f c l a r i t y i n - p r e s e n t a t i o n , no
feedback loops a r e shown on t h e f e a s i b i l i t y a n a l y s i s
f low c h a r t . For example, i f t h e market a n a l y s i s i s
I IDEAS F y S T U D Y ]
I IS INFORh!AL ANALYSIS FAVOl?f \BLE' I
L .I Y E S , N O
I5 P R E F C A S l B l L l T l TERhllNATE
I ? PREFEAS!BIL ITY
/ I ANALYSIS F A V O R A B L E ?
Y E S , .-
NO < -- .-
; ? L A N F E A S I B I L I T Y ANALYSIS I___ _] 1.-
i I S h l A R K E T AIJALYSIS T A V O R A D L E '
YES
i 7ERb';itJATE CONDUCT T E C t i N I C r l . 4rJALYSIS I i J 1 ! . - -
I FAVORP.ELE?
FAVORABLE?
- AYALYSIS N E C E S S l r R Y ?
CONDUCT SOCIAL. P R O F I T A B I L I T Y ANALYSIS
1
ANALYSIS FAVORABLE? -1
unfavourab1.e t h e d a t a may i n d i c a t e t h a t t h e o b j e c t i v e s
o f t h e s t u d y s h o i ~ l d be r e - d e f i n e d ( t h a t is ,pcle ' f ine t h e
p r o d u c t ) r a t h e r t h a n t e r m i n a t e t h e p r o j e c t .
Also t h e f e a s i b i l i t y a n a l y s i s f low c h a r t i n d i c a t e s
t h a t t h e m a r k e t , t e c h n i c a l and Othe r s t u d i e s s h o u l d b e
conduc ted i n a c e r t a i n o r d e r which i s n o t a lways a p p l i c a b l e .
B e f o r e examining t h e st.@ges o f a p r o j e c t f e a s i b i l i t y
a n a l y s i s , i t s h o u l d b e emphasized t h a t t h e method and t h e
accompanying s t u d i e s d i s c u s s e d below a r e s u g g e s t e d f o r m a t s ,
s i n c e no s t a n d a r d s e x i s t .
According t o F y f f e and C l i f t o n ( 1977 ) P . 4 , e v e r y
f e a s i b i l i t y a n a l y s i s i s d i f f e r e n t , t a i i l o r e d t o t h e s u b j e c t
a r e a a s w e l l a s t o t h e p o t e n t i a l aud ience . However, t h e
b a s i c documents u s u a l l y n e c e s s a r y f o r p r o j e c t a n a l y s i s
have been i d e n t i f i e d . The ' na tu re o f t h e s e p r o j e c t s m a y
d i c t a t e t h a t one o r more o f t h e s e documents be g i v m m o r e
emphasis o r be o m i t t e d .
IDENTIFICATION STATE - The s t a r t i n g p o i n t o f a p r o j e c t a n a l y s i s i s t h e
e s t a b l i s h m e n t o f t h e o b j e c t i v e t o he a t t a i n e d . T h i s
o b j e c t i v e may be t o p rove t h a t i t i s p o s s i b l e and d e s i r a b l e
t o add a p i e c e o f equipment t o t h e e x i s t i n g p l a n t ; t o
manufac tu re a c e r t a i n a p r o d u c t o r group o f p r o d u c t s o r
t o u t i l i z e c e r t a i n r e s o u r c e s .
According t o Fyf fe and C l i f t o n ( 1 9 7 7 ) p . 4 , i d e a s f o r
new p r o d u c t s o r d i v e r s i f i c a t i o n TOT a company c a n be
g e n e r a t e d i n an i n f o r m a l and spontaneous manner from
cus tomers , d i s t r i b u t o r s c o m p e t i t o r s , s a l e s p e o p l e and
o t h e r s o r t h e entrepreneurl : . ,can r e l y on a s y s t e m a t i c p r o c e s s
o f i d e a s g e n e r a t i o n .
For t h e p l a n n e r , t h e p r o d u c t i d e a is- more l i k e l y t o ;
s tem from a s u r v e y o f e x i s t i n g i n d u s t r y s e c t o r a l o r
i n t e r - i n d u s t r i a l a n a l y s ' i s , a r e a r e s o u r c e s u r v e y o r market
s t u d i e s . The prop,osed p r o j e c t may deve lop a s a r e sponse
t o a need t h a t appea red w i t h i n t h e framework o f i n d u s t r i a l
development p l a n n i n g .
PRE-SELECTION 'STAGE -.-- . .-
I n t n e p r e - s e l e c t i o n s t a g e , a d e c i s i o n must b e made
a s t o whether i t i s a d v i s a b l e t o examine i n d e t a i l t h e
- f e a s i b i . l i t y o f t h e p r o j e c t and i f s o t h e y d e f i n e t h e scope C'
and e s t i m a t e t h e c o s t o f subsequen t s t u d i e s . Both t h e
e n t r e p r e n e u r and p l a n n e r want t o e n s u r e t h a t t h e p r o j e c t
i s o f s u f f i c i e n t i n t e r e s t i n t h e t e c h n i c a l economic p l a n e
t o j u s t i f y an i n d e p t h s t u d y , t h a t i s , t h a t a f e a s i b l e
s o l u t i o n can be a n t i c i p a t e d . The r e s u l t s g a t h e r e d o r
o b t a i n e d d u r i n g t h e p r e - s e l e c t i o n s t a t e a r e o f t e n compiled
i n t o a p r e - f e a s i b i l i t y s t u d y . To p e r m i t d e c i s i o q o n t h e
2 7
merit of the project, the pre-feasibil i ty study s h o u l d i n c l u d e
f o l l o w i n g : -
A 1 d e s c r i p t i o n o f t h e market ( e s t i m a t e o f consumption
t r e n d s , p r e s e n t s u p p l y , p r i c e )
An o u t l i n e o f m a n u f a c t u r i n g p r o c e s s and i n f o r m a t i o n
c o n c e r n i n g a v a i l a b i l i t y o f main p r o d u c t i o n f a c t o r s
(main ly raw m a t e r i a l s ) .
An e s t i m a t e o f n e c e s s a r y i n v e s t m e n t and c o s t o f
o p e r a t i o n .
An approximate e s t i m a t e o f profidt i .
S t a t e m e n t o f a n t i c i p a t e d ma jo r problems and r i s k s .
ANAY LSIS STATE
A t t h e a n a l y s i s s t a g e , t h e v a r i o u s a l t e r n a t i v e s
i n m a r k e t i n g , t e c h n o l o g y and o t h e r c o n s i d e r a t i o n s must
be s t u d i e d and t h e f i n d i n g s w i t h s u p p o r t i n g d a t a p r e s e n -
t e d i n a s y s t e m a t i c form. For a p a r t i c u l a r p r o j e c t ,
t h e r e may b e more t h a n one p o s s i b l e t e c h n o l o g y t o eva-
l u a t e and such f a c t o r s a s p l a n t s i z e , c a p i t a l a v a i l a b i l i t y ,
raw m a t e r i a l s a v a i l a b i l i t y and l a b o u r s k t l l s and
a v a i l a b i l i t y need t o b e c o n s i d e r e d . The a n a l y s i s o f ; t h e
f e a s i b i l i t y o f a p r o j e c t can be conducted a t d i f f e r e n t
l e v e l s o f e f f o r t w i t h r e s p e c t t o t i m e , budge t and p e r s o n n e l ,
depending on t h e c i r c u m s t a n c e s . A comple te s t u d y c o n t a i n s
a market , t e c h n i c a l and f i n a n c i a l a n a l y s i s and i s r e f e r r e d
t o a s an economic' f e a s i b i l i t y s t u d y . I n some c a s e s ,
such a d e t a i l e d s t u d y i s n o t nece s sa ry . For example,
if t h e p r o j e c t o u t p u t has a confirmed buye r , then an
i ndep th market a n a l y s i s i s n o t r e q u i r e d . I n some
i n s t a n c e s , a p a r t i a l s t u d y o f t h e market o r o f t h e
t e chno log i e s s a t i s f i e s t h e d a t a ' r e q u i r e m e n t s f o r
d e c i s i o n making.
To permi t a d e c i s i o n on t h e m e r i t o f t h e p r o j e c t
t h e r e f o r e , t h e p r o j e c t f e a s i b i l i t y a n a l y s i s shou ld
i n c l u d e marke t , t e c h n i c a l , f i n a n c i a l and s o c i a l
p r o f i t a b i l i t y a n a l y s i s .
2 .6 ASSESSING THE DESIRABILITY OF AN INVESTMENT
I t i s impor t an t , a f t e r a p r o j e c t has been
adjudged f e a s i b l e and v i a b l e , t o c a r r y o u t a v i a b i l i t y
t e s t i n order:.to a s s e s s t h e c o s t s and b e n e f i t s t h a t a r e
l i k e l y t o a cc rue t o t h e i n d i v i d u a l i nves to r , . and t h e
s o c i e t y a s a whole. Th i s t a s k r e q u i r e s ' a n e x p e r t
s k i l l , knowledge and expe r i ence on t h e p a r t o f t h e
a p p r a i s e r because a s l i g h t mis take e i t h e r by omission
o r commission, may r e s u l t i n a p r o j e c t which i s v i a b l e
appear ing non-v iab le a t a f i r s t look . I t shou ld however
be no t ed t h a t t h i s p r e l i m i n a r y t e s t i s n o t an end i n
i t s e l f . I t i s r a t h e r a means t o an end. There a r e
o t h e r more s o p h i s t i c a t e d methods o r t e chn iques o f
a r r i v i n g 'at t h e v i a b i l i t y o r o the rw i se o f a p r o j e c t .
I n a s s e s s i n g t h e d e s i r a b i l i t y of an inves tment
o r i n c a r r y i n g ou t t h e p r e l i m i n a r y v i a b i l i t y t e s t ,
t h e computat ion o f t h e expec ted c o s t s and b e n e f i t s
i s r e q u i r e d . I t i s a l s o impor tan t t h a t t h e s e c o s t s
and b e n e f i t s be e s t i m a t e d a s a c c u r a t e l y a s p o s s i b l e ,
Th i s may c a l l f o r t h e a s s i s t a n c e o f some o t h e r p r o f e -
s s i o n a l s such a s economists and market a n a l y s i s .
I n a deve lop ing coun t ry l i k e o u r s , i t i s a l i t t l e more
d i f f i c u l t t o a c c u r a t e l y compute t h e expec ted c o s t s
and b e n e f i t s o f an i n d u s t r y p a r t l y due t o l a c k of
adequate d a t a and a l s o due t o t h e non-ex i s tence o f
comparablest i f6 I n s i t u a t i o n s where few comparables
e x i s t s , they a r e u s u a l l y l o c a t e d i n t h e same a r e a .
With t h e i n fo rma t ion a v a i l a b l e t o him, t h e
a p p r a i s e r goes on t o conduct a profitability t e s t .
The p r o f i t a b i l i t y t e s t i s a measure o f r a t i o between
p r e s e n t va lue o f expec ted income f low and t h e i n v e s t -
ment o u t l a y .
2 . 7 BRIEF HISTORY OF EARLY SOAP MANUFACTURING
Soap had been known f o r many y e a r s now. According
t o P l i n y t h e E l d e r , t h e phoen i c i ans p r epa red soap from
goa t s t a l l o w and wood a shes i n 600 B . C and sometime
30
use i t a s an a r t i c l e o f b a r t e r w i th t h e Gauls. The c e l t s ,
who produced t h e i r soap from animal f a t s and p l a n t s
ashes named t h e product t t ~ a i p o " 8 from which t h e word
soap was der ived .
The importance of soap f o r c l ean ing and washing was
then no t recognised u n t i l t h e second cen tu ry a f t e r C h r i s t ,
t h e Greek p h y s i c i a n , Galen, mentioned i t a s a medicat ion
and a means of c l ean ing t h e body.
Ea r ly soap makers p robably used ashes and animal
f a t s . Simple wood o r p l a n t ashes con ta in ing potassium
carbona te were d i s p e r s e d i n wate r and f a t was added t o
t h e s o l u t i o n . The mixture was then b o i l e d , ashes being
added again and aga in as t h e wate r evaporated. During
t h i s p r o c e s s , t h e f a t t y a c i d s could then r e a c t wi th t h e
a l k a l i ca rbona tes of t h e p l a n t ash t o form soap. This
method p r e v a i l e d u A t i l t he end o f t h e middle ages when
s l aked lime came t o be used t o c a m s t i c i s e t h e a l k a l i
ca rbona te . Through t h i s p r o c e s s , chemical ly n e u t r a l
f a t s could be s a p o n i f i e d e a s i l y w i th t h e c a u s t i c s o l u t i o n .
People i n N i g e r i a had prepared t h e i r soap from
t h e a v a i l a b l e technology found i n t h e i r l o c a l i t i e s . There was no gene ra l way of making soap i n t hose days
Black Soap was t h e most form of soaps made i n t hose days ,
even a s a t p r e s e n t . They a r e made mainly from wood ashes
31
e s p e c i a l l y from t h e bunches which c o n t a i n t h e palm o i l
f r u i t s . When t h e palm o i l f r u i t s have been removed,
t h e remai.ning bunches a r e b u r n t i n an open f i r e u n t i l
t h e y a r e reduced t o a she s . These a shes w i l l t h en
s e r v e a s po tass ium ca rbona t e .
The potass ium ca rbona t e (ashes ) w i l l t h e n be p l a c e d
i n a l a r g e pan and mixed w i t h wa t e r s o a s t o o b t a i n
p a s t y subs t ance . The con t en t i s t hen b o i l e d a f t e r palm
o i l has been added. The palm o i l s e r v e s a s form o f o i l .
S a p o n i f i c a t i o n t a k e s p l a c e a s t h e c o n t e n t s o f t h e pan
con t i nue t o b o i l f o r s e v e r a l hours . A f t e r s a p o n i f i c a t i o n ,
t h e c o n t e n t s form a p a s t y b l ack subs t ance which i s t h e
soap.
2 . 8 SOAP INDUSTRY I N NIGERIA
Soap p roduc t i on i s an a r e a where import s u b s t i t u t i o n
has reached an advanced s t a g e i n N ige r i a . However,
c o n s i d e r i n g t h e s i z e o f t h e Niger ian p o p u l a t i o n and t h e
n a t u r e o f soap a s a n e c e s s i t y , t h e r e l a t i v e l y l a r g e and
i n c r e a s i n g ou tpu t o f l o c a l soap p roducuers have n o t been
adequate t o remove t h e need f o r soap i m p o r t a t i o n . O f f i c i a l
s t a t i s t i c s has shown t h a t t h e r e a r e we l l over one hundred
soap p roducers i n t h e coun t ryw9 , t h e s e however d i d n o t
i n c l u d e o t h e r unknown i n d i v i d u a l p roducers found i n
many p a r t s o f t h e coun t ry .
Among t h e s e soap p r o d u c e r s , Lever B r o t h e r s , P . Z .
I n d u s t r i e s , A . J . Seward and A s s o c i a t e d I n d u s t r i e s L td .
a r e t h e o n l y major s o a p p r o d u c e r s w i d e l y knownin
t h e c o u n t r y . They accoun t f o r a b o u t 7 5 % o f t o t a l l o c a l
p r o d u c t i o n . The o t h e r soap p r o d u c e r s a r e r e l a t i v e l y
s m a l l e n t e r p r i s e s employing l e s s t h a n f i f t y (50) p e o p l e .
A s a m a t t e r o f f a c t , most o f them a r e no more t h a n a
c o t t a g e o r backyard i n d u s t r i e s u s i n g l a b o u r i n t e n s i v e
o r e n t i r e l y manual p r o d u c t i o n t e c h n i q u e s . Except f o r
v e r y few, t h e i r p r o d u c t s a r e h a r d l y known beyond t h e i r
immediate market zone and c e r t a i n l y n o t beyond t h e i r
s t a t e o f l o c a t i o n .
2 . 9 PROBLEMS FACING LOCAL MANUFACTURE OF SOAP I N
NIGERIA.
Soap i n i t s v a r i o u s forms i s one o f t h e b e s t b a s i c
n e c e s s i t i e s o f normal h e a l t h y l i f e . Thus e i t h e r f o r
body wash ing , l a u n d e r i n g o r t h e g e n e r a l c l e a n i n g o f
t h e human env i ronment , no s i n g l e i n d i v i d u a l can do f o r
l o n g w i t h o u t soap .
B e f o r e t h e appea rance o f whitemen on o u r s h o r e s ,
o u r p e o p l e have deve loped t h e a r t ( o r s c i e n c e ) o f soap
making. However, 2 i k e o t h e r a s p e c t s o f o u r c u l t w e ,
t r a d i t i o n and t e c h n o l o g y , n a t i v e s o a p making i s a d y i n g
o c c u p a t i o n . Today t h e b u l k o f o u r demand f o r s o a p i s
met from t h e p roduc t s o f f a c t o r i e s o r e s t a b l i s h m e n t s
u s i n g modern p roduc t i on f a c i l i t i e s and t e chn iques .
A t f i r s t , t h i s demand was met by impor t s , b u t o v e r t h e
f i v e decades o r s o , modern soap making was i n t roduced
i n N ige r i a and ha3 been g a i n i n g ground e v e r s i n c e
The s h o r t a g e o f f o r e i g n exchange and t h e r e s u l t i n g
r e s t r i c t i o n on i m p o r t a t i o n o f c e r t a i n raw m a t e r i a l s
r e q u i r e d f o r p roduc t i on w i l l impa i r t h e a b i l i t y o f
e x i s t i n g l o c a l p roduc t i on t o expand ou tpu t s i g n i c a n t l y
and a l s o d x s ~ ~ u r a g e t h e e n t r y o f p r o s p e c t i v e p roduce r s .
The p r e s e n t economic d i f f i c u l t i e s have impa i red t h e
a b i l i t y o f 4 o c a l p roducers t o expand p roduc t i on a t t h e
r a t e r e q u i r e d due t o i n f l a t i o n and h igh c o s t o f equ ip-
ments and m a t e r i a l s f o r p roduc t i on .
2.10 NI GERIA' S RAW MATERIALS POTENTIAL FOR SOAP PRODUCTION
The major raw m a t e r i a l s r e q u i r e d f o r t h e p roduc t i on
o f soap a r e t a l l o w , palmkernel o i l , palm o i l , c u a s t i c
soda , sodium s i l i c a t e , magnessium s u l p h a t e perfume,
c o l o u r i n g a g e n t s , packaging m a t e r i a l s and chemical
additives l i k e t i t a n i u m e t c . As can be obse rved ,
upwards of 80% of t h e raw m a t e r i a l s i n c l u d i n g palm o i l ,
palm k e r n e l o i l and packaging mate . r i a l s a r e capab le
o f be ing produced l o c a l l y .
S e v e r a l y e a r s a f t e r , N i g e r i a has r e c e n t l y j o ined
o t h e r a i l producing c o u n t r i e s i n e s t a b l i s h i n g pe t roche -
mica l p l a n t s . Pet ro leum c o n s t i t u t e s t h e major sou rce
( 9 0 % ) of o r g a n i c compounds i n t h e wor ld today.
The e s t a b l i s h m e n t o f a f u n c t i o n a l pe t rokhemica l
i n d u s t r y o f a roma t i c and o l e f i n based complexes w i l l
r e v o l u t i o n a l i s e t h e soap i n d u s t r y . i n N i g e r i a .
With t h e p r o v i s i o n o f l o c a l raw m a t e r i a l s f o r o u r
soap i n d u s t r i e s complemented w i t h adequate e n g i n e e r i n g
s e r v i c e s , t r a i n e d pe r sonne l and r e g u l a r supp ly of b a s i c
u t i l i t i e s , t h e soap i n d u s t r y can q u i c k l y f i l l t h e
yawning gap between t h e supp ly c a p a c i t y o f t h e f a c t o r i e s
and t h e p o p u l a t i o n demand.
When t h e i r o n and s t e e l i n d u s t r y commences o p e r a t i o n s
f u l l y , and t h e pe t rochemica l i n d u s t r y ach ieves e s t a b l i s h -
ment, t hen t h e machinery manufac tu re r s may become more
i n t e r e s t e d i n f a s h i o n i n g more s imple mach iner ies l o c a l l y ,
and f u r t h e r enhance t h e p r o s p e c t s of t h e s u r v i v a l and
r e v i t a l i s a t i o n o f soap i n d u s t r y i n N ige r i a .
2 . 1 1 IMPORTANCE OF SMALL SCALE ENTERPRISE
The importance o f s m a l l s c a l e e n t e r p r i s e t o t h e
growth o f economy cannot be over-emphas i z e d .
Commenting on t h e s p e c i f i c importance t o t h e
economic development o f t h e c o u n t r y , 0 k o r i e l 0 s t a t e d
t h a t t h e sma l l s c a l e e n t e r p r i s e s p rov ide employment on
a l a r g e s c a l e and t h e r e f o r e make t h e p o s s i b i l i t y o f
e q u i t a b l e d i s t r i b u t . i o n o f n a t i o n a l income more r e a l i s -
t i c . He added t h a t by c r e a t i n g more employment oppo r t -
u n i t y t h e y h e l p i n m o b i l i s i n g c a p i t a l and human r e sou rce s
t h a t would o the rw i se be l e f t i d l e .
Another importance s t a t e d was t h a t o f removal o f I
r e g i o n a l im.ba.2ance by r educ ing t h e r u s h t o t h e few
developed c e n t r e s o f t h e c o u n t r y , t h u s h e l p i n g i n
checking r u r a l urban m i g r a t i o n and t h e a s s o c i a t e d
problem of unplanned u r b a n i s a t i o n .
11 I n ano the r p u b l i c a t i o n , Ogaga s t r e s s e d t h a t
t h e e x i s t e n c e o f sma l l s c a l e bus ine s s p rov ide s
c o n s i d e r a b l e s o l u t i o n t o t h e imbalance o f payment problem
becuase of t h e i r l e s s dependence on impor ted i n p u t s
t h e r e . by reduc ing t h e demand p r e s s u r e on f o r e i g n exchange
e a r n i n g s .
Another importance o f sma l l s c a l e e n t e r p r i s e s l i e s
i n t h e f a c t t h a t some f u n c t i o n s a r e more e x p e r t l y
performed by sma l l b u s i n e s s . Th i s enab l e s them t o
c o n t r i b u t e t o t h e succe s s o f l a r g e bus ine s s .
all"'^ s t r e s s e d a n o t h e r importance o f sma l l I I
s c a l e b u s i n e s s concern a s source o f i nnova t i on . Me
main ta ined t h a t new s e r v i c e s a r e o f t e n i naugu ra t ed by I
sma l l b u s i n e s s owners who p e r c e i v e t h e need f o r such
s e r v i c e s .
Many economis t s have compounded t h e v a l u e s i n h e r e n t
i n economic c o m p e t i t i o n . When monopoly r e p l a c e s compet i -
t i o n , t h e cus tomer i s a t t h e mercy o f t h e monopo l i s t
because t h e monopo l i s t can s e t an e x h o r b i t a n t p r i c e ,
w i t h h o l d a t e c h n o l o g i c a l development , e x c l u d e new
c o m p e t i t o r s o r o t h e r w i s e abuse h i s p o s i t i o n o f power.
Smal l b u s i n e s s e n t e r p r i s e s encourage c o m p e t i t i o n i n t h e
economy.
To t h i s , A l b e r t " l3 opined t h a t t h e e x i s t e n c e o f
many h e a l t h y b u s i n e s s f i r m s i n an i n d u s t r y c o n s t i t u t e s
b a r r i e s a g a i n s t monopoly.
A11spp"14 saw s m a l l b u s i n e s s o p e r a t i o n a s a means o f
s e l f employment f o r o l d e r p e r s o n s , p h y s i c a l l y hand ica -
pped p e r s o n s and m i n o r i t y groups who f i n d i t d i f f i c u l t
t o obB.ainzgainfu1 employment e l s e w h e r e .
F i n a l l y , t h e impor tance o f s m a l l s c a l e e n t e r p r i s e
i n t h e promotion o f economic development cannot b e over-
emphasized. A~co.rdiag.@ ~ k w a e z e ~ ~ l ~ , s m a l l s c a l e e n p t e r p r i s e s
a r e a l e g i t i m a t e and v i a b l e compon.ent i n any s t r a t e g y . . f o r reconstruct^^^ .; t h e economy.
2.13 PROBLEMS OF SMALL SCALE ENTERPRISES I N N I G E R I A
There a r e s e v e r a l problems m i l i t a t i n g a g a i n s t s m a l l
s c a l e e n t e r p r i s e s i n N i g e r i a . Fa r t h e purpose o f t h i s
s t u d y , a r e a s v i t a l t o t h e t e x t w i l l be c o n s i d e r e d - h e r e .
37
In h i s p u b l i s h & d . . - a r t i c l e , O j iako" l4 s t a t e d t h a t
one problem o f sma l l s c a l e b u s i n e s s i s t h e l a c k o f
s t r a t e g i c p lann ing . Th i s problem i s b e t t e r conceived
a s l a c k of management a b i l i t y . I n most s m a l l s c a l e
b u s i n e s s , t h e e n t r e p r e n e u r i s a one man management team.
Top l e v e l d e c i s i o n t o g e t h e r w i t h a l l t h e l e s s e r t a s k s
o f management. That t h e a s s i s t an t cannot accomplish
devolve on t h e e n t r e p r e n e u r . Unfo r tuna t e ly t h i s r e q u i r e s
a d i v e r s i t y o f t a l e n t s and no i n d i v i d u a l has s u p e r i o r
a b i l i t y i n a l l a r e a s o f management. Sound p l ann ing
p r ecedes s o u n d decis ion 'making most sma l l b u s i n e s s s e e
p l ann ing a s a luxury which cou ld be a f f o r d e d on ly by
a l a r g e c o r p o r a t i o n .
"Even when t hey p l a n t h e tendency i s t h a t
t hey concern themseves on ly w i t h s h o r t term
p l a n wh i l e t h e y shy away from long term p l a n s 11 1 T
According t o George ice"'^, t h e l a c k o f t h e u s e
o f modern method o f g a t h e r i n g and a n a l y s i n g d a t a cons-
t i t u t e s a weak p o i n t i n t h e sma l l b u s i n e s s s t r a t e g i c
p l ann ing e f f o r t .
Another problem i s t h a t o f poor f i n a n c i n g a s viewed
by Kar l ~ e s ~ e r " ' ~ ' Th i s problem i s i n t h r e e dimensions
- t h e need f o r s t a r t - u p c a p i t a l , working c a p i t a l and
expansion c a p i t a l . Long term c a p i t a l i s a p a r t i c u l a r
need of sma l l concerns . Th i s c a p i t a l i s ob t a ined by
p e r s o n a l inves tment 'or by long term borrowing. Borrow-
i n g l a r g e sum of money t o be p a i d back over a p e r i o d
o f y e a r s i ~ s d i f f e r e n t f o r sma l l f i r m s because o f t h e
l i m i t e d acce s s t o c a p i t a l market .
0shunbiy i20 a l s o saw t h e key problem f a c i n g most
sma l l b u s i n e s s i n N i g e r i a a s t h a t o f l a c k of f i nance ;
" Whether f o r t h e e s t a b l i s h m e n t of new
i n d u s t r i a l o r t o c a r r y o u t expansion p l a n s
t h e i n a b i l i t y t o a t t r a c t f i n a n c i a l c r e d i t
has , s t i f f l e d t h e growth o f t h i s subsec to r " 21
I n h i s v iew, commercial banks which were expec ted
t o be t h e launch-pad' f o r t h e development o f sma l l s c a l e
i n d u s t r i e s th rough t h e p r o v i s i o n s o f l oans have f a i l e d
t o g i v e adequa te suppo r t t o them. S t i f f c o l a t e r a l
s e c u r i t y demanded by banks o f t e n means t h a t sma l l s c a l e
i n d u s t r i a l i s t s around t o meet t h e s e p r o v i s i o n s conseq-
u e n t l y l o s i n g t h e chance t o o b t a i n l oans .
Banks on t h e i r own p a r t have argued t h a t t h e y a r e
d i s cou raged t o l end t o t h i s s u b s e c t o r s i n c e many po ten-
t i a l and e x i s t i n g sma l l and medium s c a l e e n t e r p r e n e u r s
draw up f e a s i b i l i t y r e p o r t s t h a t a r e n o t v i a b l e , l a c k
manager ia l s k i l l s and do n o t mainta, in adequate f i n a n c i a l
o r a ccoun t i ng r e c o r d s about t h e i r b u s i n e s s .
The nex t s e r i o u s problem f a c i n g sma l l s c a l e
i n d u s t r i a l i s t s i s t h e d i f f i c u l t y i n unde r t ak ing p roduc t ,
p roce s s and market r e s e a r c h . Th i s d i f f i c u l t y a r i s e s
p r i n c i p a l l y from t h e demands f o r money and s p e c i a l i s e d
t a l e n t s n e c e s s a r y t o conduct r e s e a r c h . The e n t e r p r e n e u r
i s most o f t ime handicapped i n t h e s e a r e a s o f demands
i t a l s o t a k e s t h e t ime and a b i l i t y o f someone t o keep
a b r e a s t of developments i n methods, p roce s s and p roduc t s .
Th i s d i f f i c u l t y i n unde r t ak ing market r e s e a r c h may make
t h e advent and t h e u s e f u l n e s s o f v i a b l e market i n fo rma t ion
remain l ong unknown t o t h e smal l i n d u s t r i a l i s t s . The
problem of r e s e a r c h i s l e s s t r u e o f b i g b u s i n e s s because
it i s has t h e nece s sa ry c a p i t a l and t r a i n e d e x p e r t s t o
under take p roduc t and market r e s e a r c h on a l a r g e s c a l e .
The l a s t probSem o f c o n s i d e r a t i o n i s t h e e f f e c t
o f government p o l i c i e s and r e g u l a t i o n some o f which
b r i n g d i s t o r t i o n s i n t h e s t r u c t u r e and management o f
t h e s e b u s i n e s s . According t o Ke i th ~ a r s d e n " ? ' , smal l
e n t e r p r i s e s w i l l t h r i v e i f t hey a r e economical ly e f f e c i e n t
w i thou t t h e p l e t h o r a o f government i n t e r v e n t i o n s .
REFERENCES
1. G. I . M. Young: " F e a s i b i l i t y S t u d i e s v v : The Appra i s a l
J o u r n a l Vol. 38 Chicago: American
Real E s t a t e I n s t i t u t e , 1970
2 . John A. Ume; F e a s i b i l i t y And V i a b i l i t y Appra i s a l
Onib ino je P u b l i s h e r s , 1 9 7 7 p.42.
3 . I b i d
4 . I b i d
5 . George L. Schu t i : . The Appra i s a l P roce s s : New York, 1953.
6 . M.O. Kayode The A r t o f P r o j e c t E v a l u a t i o n ;
Ibadan U n i v e r s i t y P r e s s , 1979.
7. Encyclopaedia B r i a n i c a , Vol. 1 6 , 15 th E d i t i o n 1973p.915.
8. I b i d
9 . Fede ra l O f f i c e o f S t a t i s t i c s , Lagos 1993.
10. N . N . Okor ie ; Small S c a l e Bus ine s s ; I t ' s Impact on
N i g e r i a Economy. Ododuma B
J o u r n a l No. 8 , 1982. p .9 .
11. H . P . Ogaga: Encouraging Small S c a l e E n t e r p r i s e s ;
. . Bus iness Time. A p r i l 1 7 , 1986. p.13
1 2 . P. Ha l l y Small Bus iness Ventures , 2nd E d i t i o n
( C a r l i f o r n i a ; Wedsworth P u b l i s h i n g
Company, 1983).
13. K.J .Alber t S t r a i g h t Talk About Small Business 2nd
E d i t i o n Englewood C l i f f ; N . J . P r e n t i c e
H a l l I nc . 1980. p.61.
1 4 . M.Allsopp
15 G . C . Akkwaeze
16. O.F. Oj iako
1 7 . G , Roger
18. G.H. Rice
19. K . H . Vesper
20 0. O s h
2 1 . Kei th Marsden
S u r v i v a l I n Business E n t e r p r i s e s ;
London, Mercury House Inc . 1975.p.17
Small S c a l e I n d u s t r i e s And NAtional
Development ; -. Development ---- Outlo& Vol. 1
N O . 10 Lagos, A p r i l 1987. p.10
Problem of Small S c a l e E n t e r p r i s e s I n
N ige r i a .The Business A d m i n i s t r a t o r ; ---
Vo1.15 (UNN Enugu), 1987. p.40
A p r a c t i c a l P lann ing For Small B s i n e s s ;
The above t a b l e show t h a t a t o t a l 1 9 2 r e s p o n s e s were
c o l l e c t e d on what i n f l u e n c e s t h e buying d e c i s i o n o f
r e s p o n d e n t s . 30 r e s p o n d e n t s show t h a t t h e y a r e brand
l o y a l , 1 L O c l a i m t h a t t h e p r e v a i l i n g p r i c e d e t e r m i n e s , 35 s a y
t h e y c o n s i d e r q u a l i t y w h i l e 7 s a i d n o t h i n g i n f l u e n c e s t h e
d e c i s i o n t o buy a p a r t i c u l a r p r o d u c t . The h i g h e s t number
on t h e p r e v a i l i n g p r i c e i s an i n d i c a t i o n o f t h e h a r d economic
c o n d i t i o n o f t h e c o u n t r y . I t a l s o show how s e n s i t i v e
b u y e r s a r e t o t h e p r i c e o f p r o d u c t s .
Supermarkets
Local Markets
P r o v i s i o n S t o r e s
ON WHERE RESPONDENTS BW-;THEIR SOAP r
TABLE 4 . 1 4
A t o t a l o f 194 r e s p o n s e s were c o l l e c t e d . The d a t a
above show t h a t 17.58 o f t h e r e s p o n d e n t s buy t h e i r soap
from t h e s u p e r m a r k e t s , 33.5% from t h e l o c a l market w h i l e
4 9 % buy from t h e p r o v i s i o n S t o r e s n e a r t o them.
PERCENTAGE BUYING OUTLET NO OF RESPONDENT
ON HOW RESPONDENTS 'CONSIDER P R E S E N T P R I C E O F S O A P
TABLE 4 .15 I I
RESPONSE I NO O F RESPONDENTS 1 PERCENTAGE
Very h i g h I 6 5 I 33.5
Modera t e ly h i g h
The d a t a above i n d i c a t e t h a t 65% o f t h e r e s p o n d e n t s i:?.?.
c l a i m t h a t t h e p r e s e n t p r i c e i s v e r y h i g h , 95 s a i d t h a t
i t i s m o d e r a t e l y h i g h w h i l e 34 r e s p o n d e n t s d i d n o t q u a r r e l
w i t h t h e p r i c e which t h e y c l a i m i s a f f o r d a b l e t o them.
The h i g h number o f r e s p o n d e n t s i n d i c a t i n g t h a t t h e p r e s e n t
_ . - - p r i c e i s h i g h i s a l s o a n i n d i c a t i o n o f t h e h a r s h economic .- -
c o n d i t i o n i n t h e c o u n t r y and i t s e f f e c t on t h e a v e r a g e
consumer. P r i c e o f t h e p r o p o s e d p r o d u c t s h o u l d t h e r e f o r e
be f i x e d s l i g h t l y bedow t h e p r e v a i l i n g p r i c e i n t h e
Yes
marke t . ON WHETHER P R I C E I N C R E A S E A F F E C T THE BUYERS D E C I S I O N
TABLE 4.16
TOTAL
RESPONSE NO O F RESPONDENTS PERCENTAGE
A t o t a l o f 190 responses were r e c o r d e d on whether
t h e i n c r e a s e i n p r i c e a f f e c t s t h e buyers d e c i s i o n .
68.4% o f t h e r e s p o n d e n t s answered p o s i t i v e l y w h i l e
31.6% o f t h e r e s p o n d e n t s s a i d t h a t i n c r e a s e i n p r i c e
do n o t a f f e c t t h e i r d e c i s i o n t o buy a p a r t i c u l a r p r o d u c t .
ON WHETHER ADVERT1 SEMENT OF A PRODUCT INFLUENCES BUYERS
DECESION. , ..
TABLE 4.17
RESPONSE I NO OF RESPONDENTS I PERCENTAGE
Yes
The t a b l e above show t h a t a t o t a l o f 192 responses
Do n o t l i s t e n t o a d v e r t
were r e c o r d e d on t h e i n f l u e n c e o f a d v e r t i s e m e n t on t h e
buyers d e c i s i o n . 80 r e s p o n d e n t s i n d i c a t e d t h a t t h e y a r e
80
i n f l u e n c e d by a d v e r t i s e m e n t w h i l e 85 r e s p o n d e n t s s a i d
t h e y a r e n o t i n f l u e n c e d by a d v e r t i s e m e n t . 2 7 i n d i c a t e d
41.7
2 7
t h a t t h e y do n o t l i s t e n t o a d v e r t i s e m e n t .
1 4 . 0
On t h e improvement consumers w i l l e x p e c t on t h e new
brands o f soap t o be i n t r o d u c e d i n t h e market i n f u t u r e
s e r i e s o f s u g g e s t i o n s were made. While some r e s p o n d e n t s
s u g g e s t e d an improvement on t h e q u a l i t y of t h e p r o d u c t
t o meet an a c c e p t a b l e s t a n d a r d and compete : f a v o u r a b l y
6 3
w i t h impor ted o n e s , o t h e r s s u g g e s t e d a r e d u c t i o n i n
t h e p r e v a i l i n g market p r i c e o f t h e p r o d u c t .
4 . 3 SUMMARY OF QUESTIONAIRE ANALYSIS
From t h e d a t a c o l l e c t e d t h r o u g h t h e q u e s t i o n it
c o u l d be deduced t h a t t h e p roposed p r o d u c t i s an impor t -
a n t househo ld n e e d w i t h a v e r y h i g h p r e s e n t and f u t u r e
demand. The d a t a i n d i c a t e d t h a t v i r t u a l l y e v e r y house-
h o l d u s e Soap d a i l y e i t h e r f o r body c l e a n i n g o r f o r
washing. The d a t a a l s o r e v e a l e d t h a t consumer a c c e p t a n c e
o f t h e p roposed p r o d u c t w i l l be f a v o u r a b l e s i n c e t h e
q u a l i t y i s e x p e c t e d t o be h i g h and t h e p r i c e v e r y . .
modera te and a f f o r d a b l e by m a j o r i t y o f t h e consumers i n
t h e a r e a . The s e n s i t i v e n a t u r e o f p r i c e and q u a l i t y t o
consumers were n o t e d d u r i n g t h e d a t a c o l l e c t i o n .
There were a l s o s u g g e s t i o n s on t h e improvement e x p e c t e d
i n t h e p roposed p r o d u c t which i n c l u d e h i g h q u a l i t y
and moderate p r i c e . A l l t h e s e w i l l h e l p i n d e s i g n i n g -.
a n ' a c c e p t a b l e f e a s i b i l i t y r e p o r t on t h e p r o j e c t .
4.4 SUMMARY OF FINDINGS ON FIELD SURVEY
The f i e l d s u r v e y conduc ted which was a n o t h e r s o u r c e
o f p r i m a r y d a t a r e v e a l e d t h e f o l l o w i n g : -
(1) The s i t e f o r t h e p r o j e c t h a s enough l a n d f o r
p o s s i b l e expans ion i n t h e f u t u r e .
The s i t e h a s s u i t a b l e a c c e s s t o a m a j o r highway
Ehime - Mbaise-Okpala Road.
I t h a s a l o c a t i o n s t r a t e g i c a l l y p l a c e d f o r t h e
d i s t r i b u t i o n o f p r o d u c t s b o t h t o t h e l o c a l con-
sumer and p o s s i b l e e x p o r t m a r k e t s
The s i t e l e n d s i t s e l f t o s u i t a b l e g r a d i n g and
..a.r? il;l a g ~ . F i n a l l y , t h e s i t e h a s t h e needed u t i l i t i e s l i k e
power, a s t h e s i t e i s hooked t o t h e n a t i o n a l g r i d and
w a t e r t o s u p p o r t t h e f a c t o r y .
CHAPTER FIVE
PROJECT SUMMARY AND RE COMEENDAT1 ONS
THE PROJECT
T h i s s t u d y was c a r r i e d o u t t o de te rmine : t h e market -
i n g , t e c h n i c a l f e a s i b i l i t y , f i n a n c i a l and commercial
v i a b i l i t y o f e s t a b l i s h i n g a s m a l l s c a l e soap m a n u f a c t u r i n g
i n d u s t r y i n Ahiazu Mbaise L o c a l . Government Area , Imo S t a t e .
SPONSOR --- The s p o n s o r o f t h e p r o j e c t i s t h e Local Governement
A d m i n i s t r a t i o n .
INVESTMENT COST
The t o t a l i n v e s t m e n t c o s t f o r t h e p r o j e c t i s
e s t i m a t e d a t W2,417,100 made up a s f o l l o w s : -
F ixed A s s e t s C a p i t a l Investmemt = W1,950,000
I n i t i a l Working C a p i t a l (Yr .1) = 302,000
P r e - i n v e s t m e n t
5 % C 0 n t i n g e n . c ~
TOTAL
FINANCING PLAN
P r o v i s i o n - - 115,100
The e n v i s a g e d f i n a n c i n g ar rangement i s a s fo&lows : - Owners E q u i t y
Term L,oan 1 ,000 ,000 11.37%
417,100 O v e r d r a f t 17 .26%
TOTAL
PROFITABILITY
The pro-ject promises t h e fo l l owing n e t p r o f i t a f t e r
t a x f o r p r o j e c t e d f i v e y e a r s p e r i o d : -
RETURN ON EQUITY -
YEAR
RETURN ON TOTAL INVESTMENT
YEAR
1
% RETURN
% RETURN
PAYBACK PERIOD
The payback p e r i o d f o r t h e p r o j e c t i s two y e a r s
and t h r e e months ( 2 y r s and 3 months) .
T h i s s t u d y shows t h a t t h e p r o j e c t i s t e c h n i c a l l y
f e a s i b l e and commercia l ly v i a b l e . On t h i s b a s i s t h e
f o l l o w i n g recommendations towards t h e r e a l i s a t i o n o f
t h e p r o j e c t a r e ,made.
(1.) The implementa t ion o f t h e p r o j e c t s h o u l d be p u r s u e d
w i t h o u t much w a s t e o f t ime . T h i s w i l l h e l p t o
e l i m i n a t e c o s t i n c r e a s e s which may a f f e c t i n p u t
f i g u r e s used i n t h e s t u d y . I t w i l l a l s o r educe t h e
chances o f occurence o f any changes i n t h e economy
t h a t might a f f e c t t h e r e a l i s a t i o n o f t h e p r o j e c t .
( 2 ) Adequate s t o c k o f raw m a t e r i a l s s h o u l d be c a r r i e d
a t a l l t i m e s s o a s t o a v o i d p r o b l e m s - t h a t might
a r i s e a s a r e s u l t o f i r r e g u l a r s u p p l i e s . F ive
( 5 ) p e r c e n t p r o v i s i o n i n p r i c e h a s been recommended
a n n u a l l y t o t a k e c a r e ' o f i n f l a t i o n a r y changes.
(3) Q u a l i f i e d p e r s o n n e l s h o u l d be employed t o work f o r
t h e p r o j e c t . A t e n (10%) p e r c e n t i n c r e a s e i n wages
h a s been recommended a s from t h e t h i r d y e a r o f
com~nerc ia l o p e r a t i o n .
High q u a l i t y p roduc t shou ld be aimed a t by t h e
p r o j e c t t o e n a b l e i t compete f a v o u r a b l y w i t h
e x i s t i n g ones i n t h e market:
A p p l i c a t i o n shou ld be made t o i n s t i t u t i o n a l
i n v e s t o r s and inves tment banks f o r f i n a n c i a l
a s s i s t a n c e t o e n a b l e t h e p r o j e c t t a k e o f f .
THE FEASIBILITY REPORT
PREAMBLE
I n t h e b r o a d e s t s e n s e , e v e r y r a t i o n a l d e c i s i o n t o make
a new inves tment i s p receded by an i n v e s t i g a t i o n o f t h e
f e a s i b i l i t y o f t h e p r o j e c t , whether o r n o t t h i s i s c a r r i e 2
o u t i n a fo rmal manDer. The l a r g e r t h e p r o j e c t and
t h e g r e a t e r t h e i n v e s t m e n t , t h e m r c f o r m a l i z e d t h e
inves tment . Assurance i s needed t h a t t h e market
e x i s t s o r can be deve loped , t h a t raw m a t e r i a l s can be
o b t a i n e d , t h a t s u f f i c i e n t l a b o u r s u p p l y i s a v a i l a b l e ,
t h a t l o c a l s e r v i c e s v i t a l t o t h e p r o j e c t a r e a t hand
and t h a t t h e o v e r a l l c o s t s f o r p l a n t equipment , l a b o u r
and raw m a t e r i a l s i n p u t s w i l l be a c e r t a i n o r d e r .
Most i m p o r t a n t l y , i t must be de termined t h a t introme w i l l
exceed c o s t s by a margin s u f f i c i e n t t o make t h e p r o j e c t
f i n a n c i a a t t r a c t i v e . 9 However, i f t h e p r o j e c t i s s m a l l , t h e . s t u d y format
may be q u i t e i n f o r m a l . Perhaps t h e r e wil l . be no formal
s t u d y a t a l l and l i t t l e accumula t ion o f a c t u a l d a t a .
None the less , t h e f e a s i b i l i t y c a l c u l a t i o n s wi l l . have t o b e
computed and eva l .ua ted even i f i n an in fo rmal manner,
b e f o r e t h e u l t i m a t e s t e p o f a c t u a l inves tment i s t a k e n .
There a r e d i f f e r e n t ways of p r e s e n t i n g f e a s i b i l i t y
r e p o r t . However, f o r t h e purpose o f t h i s p r o j e c t t h e
Uni ted Nat ions I n d u s t r i a l Development O r g a n i s a t i o n
(UNIDO) formag f o r p r e s e n t i n g f e a s i b i l i t y r e p o r t i s
adopted h e r e .
5 . 2 PROJECT BACKGROUND AND HISTORY
The government of Ahiazu Mbais h a s been anxious
t o e x p l o i t a meaningful development o f t h e s m a l l s c a l e
i n d u s t r i e s i n t h e a r e a . I t r e c o g n i s e s t h a t a s e r i o u s
e f f o r t i s needed t o upgrade t h e s t a n d a r d o f l i v i n g i n t h e
a r e a th rough t h e encouragement of manufac tu r ing i n
a d d i t i o n t o t r a d i n g which ..' , i s t h e s o u r c e o f l i v e l i h o o d
of g r e a t e r p e r c e n t a g e o f ' t h e p o p u l a t i o n .
The v a r i o u s and p r e v i o u s a d m i n i s t r a t i o n s i n t h e
loca l . government have i n t h e p a s t made s e v e r a l e f f o r t s
t o s e t up small. s c a l e i n d u s t r i e s i n t h e a r e a i n l i n e
w i t h t h e F e d e r a l Government p o l i c y on rural i n d u s t r i a l i -
s a t i o n . The e s t a b l i s h m e n t of a s m a l l s c a l e soap
i n d u s t r y i n t h e a r e a has been on t h e l i s t o f p r o j e c t s
earmarked f o r e x e c u t i o n by t h e l o c a l government
a d m i n i s t r a t i o n . The technol .ogica1 e f f e c t of a soap
i n d u s t r y on t h e socio-economic s i t u a t i o n of t h e l o c a l
government i n g e n e r a l i s immense and i n c l u d e s t h e
i n c r e a s e i n t h e number o f s k i l l e d workers i n t h e l a b o u r
f o r c e through employment and t m i n i n g i n t h e i n d u s t r y .
I t i s a l s o economica l ly and p o l i t i c a l l y d e s i r a b l e f o r ,
N i g e r i a t o produce soap s i n c e s h e h a s t h e l o c a l raw
m a t e r i a l s a t home.
The economy i s no l o n g e r e n j o y i n g t h e bonanza
c r e a t e d by t h e o i l boom. I t has slumped w i t h t h e d rop
i n o i l revenue. S i n c e one o f t h e economic t r a n s f o r m a -
t i o n b rough t about by t h e o i l boom was t h e urban b a s e d
c o n c e n t r a t i o n o f s e r v i c e s and c o n s t r u c t i o n e n t e r p r i s e s ,
t h e r u r a l a r e a s were &rained. . + o f l a b o u r . Consequen t ly ,
t h e r e was d e p r e c i a t i o n o f development o f s e l f s u s t a i n i n g
p o t e n t i a l s . The r e s u l t was an i n c r e a s i n g d r a i n on t h e
e x t e r n a l r e s e r v e s t o f i n d even b a s i c food r e q u i r e m e n t s
o f t h e i n c r e a s i n g p o p u l a t i o n . There was t h e r e f o r e
d r a i n s i n t h e r e s e r v e t o meet t h e i n c r e a s i n g h i g h
import p r o p e n s i t y f o r t h e c a p i t a l goods, raw m a t e r i a l s
and consumer i t ems . To stem t h i s , t h e government
i n t r o d u c e d v a r i o u s c r i s i s management and economic
p o l i c i e s r a n g i n g from t h e s t r u c t u r a l Adj.ustment Progamme
t o t h e Fore ign Exchange Markets .
71
The ba s i c . j d i i l o sophy of t h e s e schemes i.s t o r e v e r t
t o c o n s i d e r a b l e s e l f r e l i a n c e by knc rea s ing l o c a l p roduc t -
i on . . Th i s approach i s i n t e n d e d t o reduce t h e l e v e l o f
unemployment which had h i t even t h e g r adua t e and p o s t -
g radua te l e v e l s . The i n d u s t r i a l i m p l i c a t i o n o f t h e s e
f e a t u r e s i n t h e p n o m y - i s t h e r e f o r e t o r e d i r e c t t h e
p roduc t i on r e s o u r c e s o f t h o s e s e c t o r s t h a t a r e c o s t
e f f e c t i v e i n t h e convers ion o f l o c a l raw m a t e r i a l s i n t o
immediate o r f i n a l p r o d u c t s .
P r a c t i c a l l y , a l l f i r m s i n t h e manufactur ing s e c t o r
have under taken programmes d i r e c t e d a t l o c a l sou rc ing
o f t h e i r m a t e r i a l s i n p u t . A soap i n d u s t r y ha s 95% l o c a l
raw m a t e r i a l i n p u t .
The j u s t i f i c a t i o n o f t h i s p r o j e c t i s based on t h e
fo l l owing f a c t o r s : -
- The i n c r e a s i n g need and demand f o r soap a s an impor tan t
household need bo th f o r cleaning t h e body and f o r
washing.
- The need t o d i v e r s i f y t h e revenue base o f t h e l o c a l
government.
- The need t o c r e a t e employment o p p o r t u n i t t e s f o r t h e
indige.nes o f t h e a r e a .
- The a v a i l a b i l i t y o f a b r i g h t inves tment c l i m a t e i n
t h e a r e a of soap manufactur ing.
- The a v a i l a b i l i t y o f u t i l i t i e s l i k e power a s t h e l o c a l
government i s a h e a d y hooked t o t h e n a t i o n a l g r i d
and wa t e r ' f o r i n d u s t r i a l and domest ic purposes .
- There i s a l s o a v a i l a b i l i t y i n l a r g e q u a n t i t y o f t h e
major raw m a t e r i a l s i n t h e a r e a .
The execu t i on o f t h e p r o j e c t i s i n t ended t o l a s t
f o r one yea r .
5 . 3 MARKET AND PLANT CAPACITY
THE PRODUCT: SOAP
This i s a cleansing agen t d i s c r i b e d chemica l ly a s
an a l k a l i me t a l s a l t o f a l ong carbon cha in monocarboxylic
a c i d r e p r e s e n t e d by sedium myristate(NaCODO13 H 2 9 ) .
CH2 CH2 CH2 CH2 CH2 CH2 Carboxyla te
The hydrocarbon p o r t i o n i s hydrophobic and t h e
Carboxyla te p o r t i o n i s h y d r o p h i l i c .
The p roduc t can be used i n many ways. I t can be
used f o r c l e a d n g human body, washing p l a t e s , p o t s and
o t h e r househoad equipment, f a b r i c s and f l o o r s . Hence
i t can be used i n househo lds , r e s t a u r a n t s . , h o s p i t a l s ,
l aundry f i r m s e t c .
5 .3 .2 MARKET
According t o Imaga ( 1 9 9 4 ) p.603, t h e environment
i n which b u s i n e s s o p e r a t e s i s known a s market . ' I t i s
h i g h l y i n f l u e n c e d by t h e buyers and s e l l e r s b a h a v i o u r s , prod-
u c t o f f e r e d by t h e s u p p l i e r s , t h e i r p r i c e s and q u a n t i t y ,
p o l i t i c a S l e g a 1 and a d m i n i s t r a t i v e r e s t r i c t i o n s .
The e n t i r e l o c a l government a r e a and s t a t e w i l l b e
t aken a s t h e p r imary market zone f o r t h e p r o d u c t . The
p roduc t w i l l n a t u r a l l y f i n d pre-empt ive o p t i o n among
t h e l o c a l s . T h e r e f o r e , t h e market f o r t h e p r o d u c t w i l l
comprise t h e i n d i v i d u a l households and s e r v i c e o r g a n i s a t i o n
w i t h i n t h e l o c a l government and i t s e n v i r o n s . I n o t h e r
words, t h e p r o d u c t w i l l o f f e r p r i m a r i l y t o r e s i d e n t s
o f Ahiazu Mbaise and second ly o t h e r p a r t s o f t h e s t a t e .
Thus, a l l u s e r s o f soap i n t h e s e a r e a s c o n s t i t u t e t h e
market f o r t h e p r o d u c t .
5 . 3 . 3 MARKET DEMAND STUDY
The e s t i m a t e o f demand canno t be e a s i l y e v a l u a t e d
b o t h f o r l o c a l and i n d u s t r i a l u s e s . However, w i t h t h e
p r o l i f e r a t i o n o f l a u n d r y and d r y c l e a n i n g f i r m s , i n c r e a s e
i n b i r t h s w i t h reduced i n f a n t m o r t a l i t y , soap w i l l a lways
be i n demand. I t need a l s o be s a i d t h a t t h e p r o d u c t can
be used b o t h a s a t o i l e t soap and l a u n d r y soap going by
r e s u l t s from t h e r e s e a r c h conducted, i t i s t o b e perfumed
a n d s o h a s a u n i q u e m a r k e t n i c h e . A l l consumers o f t h e
p r o d u c t c o n s t i t u t e t h e t o o l f o r t h e p r o d u c t .
7 4 Obvious ly , t h e p r o d u c t h a s c o m p e t i t o r s l i k e
T r u c k - s o a p , Duck. s o a p , Key soap b o t h i n b a r and t a b l e t
forms a s i n d i c a t e d i n t h e r e s u l t o f t h e market r e s e a r c h
conducted . However, t h e o n l y d i f f e r e n c e i s i n t h e
f a c t t h a t t h e p r o j e c t p r o d u c t can n o t o n l y be used on
c l o t h e s b u t can a l s o b e used a s t o i l e t s o a p b e c a u s e
it i s perfumed.
The market s i t u a t i o n i s such t h a t t h e p r o j e c t w i l l
be more t h a n a d e q u a t e l y accomodated w i t h i n t h e a v a i l a b l e
d o m e s t i c m a r k e t . The market i s more t h a n enough t o
a b s o r b t h e p r o d u c t s w i t h i n a downstream i n d u s t r i a l i s e d
Ahiazu Mbaise Loca l Government Area. I t can a l s o f i n d
market i n n e i g h b o u r i n g s ta tes ,but on a n a t i o n a l s c a l e ,
t h e p r o d u c t w i l l n o t make any s i g n i f i c a n t impact on
t h e s u p p l y market .
The p l a n t w i l l i n i t s f i r s t y e a r o f o p e r a t i o n
produce one s i z e o f p r o d u c t t y p e s . I n consequence o f
t h i s d i s t i n - c t f e a t u r e , a segment o f t h e market i s
e x p e c t e d t o b e cove red . T h i s d i f f e r e n t i a t i o n i n
p r o d u c t s i s advan tageous becuase i t a l l o w s f o r d e e p e r
p e n e t r a t i o n i n t o t h e marke t .
5 . 3 . 4 . CURRENT DEMAND I
The c u r r e n t demand f o r t h e p r o d u c t ( soap) i s v e r y i
h i g h a s v i r t u a l l y e v e r y househo ld and o r g a n i s a t i o n i n
t h e a r e a i n d i c a t e d t h e y u s e s o a p d a i l y i n body c l e a n i n g
and washing. A s e a r l i e r i n d i c a t e d , t h e p r o l i f e r a t i o n
of l a u n d r y and d r y c l e a n i n g f i r m s h a s made t h e demand f o r
s o a p c u r r e n t l y v e r y h i g h . The marke t s i z e e s t i m a t e i s
f o r o v e r twen ty thousand (20,000) househo ld p r e s e n t l y . ,
The annua l e s t i m a t e d e x p e n d i t u r e on t h e a v e r a g e p e r house-
h o l d on t h e p r o d u c t i s c u r r e n t l y p u t a t o v e r f i v e hundred
n a i r a (W500) a s i n d i c a t e d i n t h e r e s u l t o f t h e r e s e a r c h
conducted . The market s i z e i t t h e n aimed a t by m u l t i p l y -
i n g t h e e x p e n d i t u r e by number o f h o u s e h o l d s . Hence
marke t s i z e i s 20,000 x 500 = W10,000,000 c u r r e n t l y .
5 .3.5 MARKET SHARE ESTIMATE
Market s h a r e i s t h e p r o p o r t i o n o f t h e t o t a l market
which t h e p romote r s hope t o c o n t r o l when t h e b u s i n e s s i s
e s t a b l i s h e d . The s h a r e o f t h e market becomes t h e s a l e s
f o r e c a s t . E s t i m a t i o n o f market s h a r e w i l l a s s i s t i n
p r o d u c t p l a n n i n g . The d e t e r m i n a t i o n o f t h e f o l l o w i n g
- E s t i m a t e d marke t f o r p r o d u c t T i n t h e i n d u s t r y
- The number o f c o m p e t i t o r s ( t h r e e i n number p l u s
t h e p r o d u c t , making f o u r 4 ) .
The marke t s h a r e i s e s t i m a t e d by d i v i d i n g t h e
market f o r t h e p r o d u c t by t o t a l number o f c o m p e t i t o r s
5 . 3 . 6 MARKET GROWTH POTENTIALS/FUTURE DEMAND
Fu tu re demand i s e x p e c t e d t o be h i g h a s t h e
p o p u l a t i o n i s e x p e c t e d t o grow w i t h an i n c r e a s e i n t h e
demand f o r soap. With t h e e x p e c t e d i n c r e a s e i n t h e
p r o l i f e r a t i o n o f l a u n d r y and d r y c l e a n i n g f i r m s .
i n c r e a s e i n b i r t h s w i t h reduced i n f a n t m o r t a l i t y
soap w i l l always be i n demand. There a r e v a l i d r e a s o n s
t o e x p e c t improvement i n t h e growth of t h e i n d u s t r y .
Th i s w i l l l e a d t o growth o f t h e n a t i o n a l economy and
t h e r e b y i n c r e a s e t h e Gross Domestic Product .
5 . 3 . 7 SALESPLAN AND MARKETING
P r o j e c t e d s a l e s i s p u t a t 2 5 % o f t h e market s h a r e .
S i n c e t h e p r o d u c t s w i l l be new t o t h e market i t i s
c o n s i d e r e d s t r a t e g i c t o s t a f t a t t h a t r a t e .
5 . 3 . 8 PRICING POLICY
The p r i c i n g p l o i c y w i l l be market de termined.
The o p e r a t i o n c o s t w i l l be i n e f f i c i e n t s i n c e it may
end up w i t h a low p r i c e o r p r i c e t h e p r o j e c t e d p roduc t
o u t o f t h e market . I n o t h e r words i n f i x i n g t h e p r i c e ,
it w i l l be i n accordance w i t h t h e c o m p e t i t o r s p r i c e .
T h i s i m p l i e s t h a t t h e p r i c e o f t h e p r o d u c t w i l l compete
f a v o u r a b l y w i t h t h a t o f o t h e r c o m p e t i t o r s t o avo id
p r i c e war and l e s s s a k s ,
The advantages o f t h e fo l low-the-market p r i c i n g
method i s favoured f o r 5hese r e a s o n s
- S i n c e t h e p r o d u c t i s new t o t h e marke t , t h e p r i c e
i s n o t expec ted t o d e v i a t e much from p r i c e s
p r o s p e c t i v e consumers a r e used t o ; ! - Higher t h a n t h e p r e v a i l i n g market p r i c e may encourage I
unwanted c o m p e t i t i o n . Hence p r i c e s s e t shou ld p u t
o f f c o m p e t i t o r s from e n t e r i n g t h e f i e l d a s much a s
p o s s i b l e .
The p r o d u c t p r i c e w i l l f i r s t a d o p t . . t h i s method
and t h e n i n c r e a s e t h e p r i c e a s demand i n c r e a s e s . The
p roduc t s t r u c t u r e , q u a l i t y s p e c i f i c a t i o n s and c o m p e t i t i v e
p r i c e s s h o u l d p r o v i d e t h e means o f a c h i e v i n g t h e d e s i r e d
market p e n e t r a t i o n s i n c e t h e immediate c o m p e t i t o r s a r e
n o t e x t r a l o r d i n a r i l y fo rmidab le . The p r i c e p e r b a r o f
t h e soap t o be produced i s p u t a t N=40.
5 . 3 . 9 MARKETING STRATEGY
The marke t ing s t r a t e g y f o r t h e p r o d u c t o f t h e
proposed p r o j e c t i s t o s e l l t h e p r o d u c t s th rough d i s t r i -
b u t o r s t o b e a p p o i n t e d and p a r t l y d i r e c t t o r e t a i l e r s
e s p e c i a l l y on major marketdays i n t h e a r e a th rough
salesmen. Subsequen t ly , a t t e n t i o n w i l l be f o c u s s e d on
expansion of t h e market a r e a t o encompass nea rby towns.
D i s t r i b u t i o n i s by way of a d i r e c t supp ly t o f u l f i l l
o r d e r s on long. d u r a t i o n c o n t r a c t o f s a l e s b a s i s .
Promot ional p r a c t i c e s w i l l a l s o be by d i r e c t d e a l i n g s
w i t h i n which r e q u i r e d p roduc t s p e c i f i c a t i o n s a r e r e c o n c i l e d
and matched wi th , p roduc t i on s c h e d u l l i n g programmes.
5 .3 .10 DISTRIBUTION SYSTEM
The d i s t r i b u t i o n system f o r t h e proposed i n d u s t r y ' s
p roduc t s w i l l be th rough t h e f o l l owing c h a n n e l s ;
- Driver/Salesman t o l o c a t i o n depo t s s i t u a t e d i n
d . i s t r i c t s i n pr imary t a r g e t s t o u l t i m a t e consumers.
- Driver/Salesman t o r e t a i l e r s . i n major market .
- D i r e c t t o d i s t r i b u t o r s appo in ted by t h e company. - - ur ive r iSa lesman t o major p r o v i s i o n s t o r e s .
These d i s t r i b u t i o n channel i s i n l i n e w i t h responses
from p o t e n t i a l consumers du r ing t h e r e s e a r c h conducted.
Th i s i s i l l u s t r a t e d t h u s : -
Lot
Con J/
sumers Consumers J. P r o v i s i o n s t o r
4 Consumers
To f a c i l i t a t e d i s t r i b u t i o n , fairly used pick-up van w i l l
be r e q u i r e d .
79
5 .3 .11 ADVERTISEMENT AND PROMOTION
Though responses from p o t e n t i a l consumers i n d i c a -
t e d t h a t adver t i sement do n o t i n f l u e n c e t h e i r buying
d e c i s i o n , t h e r e s e a r c h e r used deduc t i ve r ea son ing t o
e s t a b l i s h t h e importance o f adver t i sement and promotion
e s p e c i a l l y f o r new p r o d u c t s . S ince t h e volume w i l l
i n i t i a l l y be s m a l l and becuase o f t h e n a t u r e o f t h e
t a r g e t marke t , i t i s cons ide r ed t h a t h a n d b i l l s be
used. Also p u b l i c add re s s system i s t o be i n s t a l l e d
on t h e p ick-up van f o r a d t e r t i s e m e n t and promot ional
purposes .
For hand b i l l s , 1 ,200 hand b i l l s w i l l be p r i n t e d
and d i s t r i b u t e d t o r e t a i l e r s and consumers. The c o s t
o f t h e hand b i l l . w i l l b e p u t a t @000
5.3.12 PLANT CAPACITY
The p roduc t i on p l a n c o n s i d e r s e s t i m a t e s t o ach ieve
d e s i r e d s a l e s c a p a c i t y . The p roduc t i on p l a n t f o r t h i s
p r o j e c t ha s t h e p r o j e c t e d c a p a c i t y o f producing 200 b a r s
o f soap d a i l y g iven a p r o j e c t e d t o t a l of 60,000 b a r s t o
be produced i n 300 working days i n t h e f i r s t y e a r o f
o p e r a t i o n a t 7 0 % i n i t i a l c a p a c i t y u t i l i z a t i o n . is
planned t o o p e r a t e a one s h i f t working sys tem o f e i g h t
hours d a i l y excep t on Sa tu rdays and Sundays. The l e v e l
8 0
o f a c t i v i t y i n t h e p l a n t w i l l be g r a d u a t e d i n o r d e r t o
promote g r a d u a l e n t r y i n t o t h e m a r k e t , a l l o w t ime f o r
t h e development o f n e c e s s a y s k i l l and a l s o t i m e t o h a n d l e
problems a s s o c i a t e d w i t h p r o d u c t i o n p l a n t s .
5 . 4 MATERIALS INPUT -. --- -- I n t h e manufac tu r ing o f s o a p , t h e p n y s i c a i and
chemica l c h a r a c t e r i s t i c s o f t h e f i n i s h e d p r o d u c t s depend
d i r e c t l y on t h e raw m a t e r i a l s employed i n t h e , p r o d u c t i o n s .
DTf fe ren t k i n d s o f r a w m a t e r i l a s a r e employed i n t h e
p r o d u c t i o n . However, t h e p r i n c i p a l raw m a t e r i a l s t h a t a r e
recommended f o r OSe i n t h e p roposed i n d u s t r y a r e palm
o i l ( b i e a c h e d ) , palm k e r n e l o i i and t h e chemica l components
and a d d i t i v e s i n c l u d e c a u s t i c s o d a (sodium h y d o x i d e ) ,
c a u s t i c p o t a s h , p h o s p h o r i c a c i d , sodium c a r b ~ n a t e , sodium
c h l o r i d e ( s a l t l , per fumes and c o l o u r i n g ma t t e - r .
Most o f t h e s e raw m a t e r i a l s a r e s o u r c e d l o c a l l y .
Palm o i l and palm k e r n e l o i l a r e produced i n v e r y l a r g e
q u a n t i t y i n t h e a r e a . While palm o i l w i l l be p r o v i d e d
t h r o u g h t h e ADA PALM N I L L a t Umuogu, ~ b o k ~ b a i s e and
n e a r b y l o c a l m a r k e t s , t h e palm k e r n e l o i l w i l l be o b t a i n e d
b o t h from t h e palm k e r n e l o i i M i i l i n Nguru Mbaise and
o t h e r l o c a l p a l n k e r n e l e x t r a c t i o n Mills w i t h i n t h e l o c a l
government.
The chemica l a d d i t i v e s can b e o b t a i n e d i n ma jo r
s u r r o u n d i n g towns l i k e Aba, Owerri o r even Enugu from
i m p o r t e r s o f t h e s e p r o d u c t s . . On t h e whole abou t 95%
of t h e raw m a t e r i a l s f o r soap p r o d u c t i o n a r e s o u r c e d
l o c a l l y . The sum o f W540,OOO have been p r o j e c t e d f o r
t h e p r o v i s i o n o f raw m a t e r i a l s f o r t h e f i r s t y e a r o f
o p e r a t i o n .
A b u f f e r p r o v i s i o n i s made t o a b s o r b t h e shock o f
f l u c t u a t i n g demand o f p r o d u c t and s u p p l y o f raw m a t e r i a l s .
I t i s e n v i s a g e d t h a t two ( 2 ) months raw m a t e r i a l needs
w i l l be adequa te . See s c h e d u l e f o r raw m a t e r i a l s c o s t
i n T a b l e ' S . 1 . The u n i t c o s t o f raw m a t e r i a l s p e r b a r i s
p u t a t W9.00.
TABLE 5 .1
ESTIMATED COST OF RAW MATERIALS ANNUALLY
Year o f Commercial
o p e r a t i o n s
E s t i m a t e d Cos t o f "Raw
M a t e r i a l s (W)
540,000
647,986
680,386
758,910
937,753
NOTE: 5 % a n n u a l i n c r e a s e i n c o s t i s recommended t o t a k e c a r e
o f i n f l a t i o n a r y r a t e .
5 . 4 . 1 INVENTORY CONTROL SYSTEM
An invef l tory system f o r raw m a t e r i a l s used i n
p roduc t ion i s recommended f o r p roper c o n t r o l o f raw
m a t e r i a l needs. Th is w i l l i nvo lve( t h e use o f b i n ca rds .
This c a r r i e s such in format ion as t h e name of t h e i t em,
s tock number and re 'order p o i n t . Addi t ions and s u b s t r a c -
t i o n s t o t h e inven tory a r e recorded. This w i l l enab le
management t o e a s i l y a s s e s s t h e a v a i l a b l e and needed.
Informat ion such a s p r i c e , amount a r d e r e d b u t no t r ece ived ,
s p e c i f i c a t i o n s , l o c a t i o n s i n s t o c k room e t c a r e a l s o
recorded f o r e a s y - m a t e r i a l handl ing a d m i n i s t r a t i o n .
The recommended inven to ry ca rd w i l l look t h u s : -
Fig. 5.2
ITEM I REORDER POINT
IN
DATE AMOUNT
ORDE R AMOUNT STOCK CONTROL
OUT
DATE AMOUNT BALANCE
5 .5 LOCATION ANDSITE
The proposed soap manufactur ing i n d u s t r y i s t o
be l o c a t e d n e a r t h e loca l governmeht headqua r t e r s a t
Afor-Oru on a 3 a c r e l and provided by t h e l o c a l
government a d m i n i s t r a t i o n f o r such purpose , The
- s i t e commands good; access road t o t h e a s p h a l t e d
Ehime- Mbaise - Okpala road l i n k i n g t h e s i t e t o t h e
commercial town of Aba, Por t -Harcour t , Owerri t h e
s t a t e c a p i t a l and Umuahia t h e c a p i t a l o f Abia S t a t e .
The s i t e t hus p rov ides easx - acces s t o major commer-
c i a l a r e a s . The l o c a t i o n i s w e l l a p p r o p r i a t e i n
terms of good acces s roads f o r supply of needed raw
m a t e r i a l s and f o r evacua t ion o f f i n i s h e d p roduc t s .
No problem of t r a n s p o r t a t i o n o f goods and pe r sona l
a r e t h e r e f o r e envisaged.
During t h e f i e l d survey conducted on t h e s i t e
by t h e r e s e a r c h e r , t h e fo l lowing obse rva t ions were
made : - - The s i t e have enough land f o r p o s s i b l e expansion
of a c t i v i t i e s and s e r v i c e s .
- The s i t e have s u i t a b l e access t o major highway.
- I t has a l o c a t i o n s t r a t e g i c a l l y p l aced f o r t h e
d i s t r i b u t i o n of p roduc ts both t o t h e l o c a l
consumer and probable expor t markets .
- I t l ends i t s e l f t o s u i t a b l e g rad ing and dra inage.
- F i n a l l y , i t has p r o v i s i o n f o r power and w a t e r
s u p p l y t o ' s u p p o r t t h e f a c t o r y .
5 .5 .1 UTILITIES
The u t i l i t i e s r e q u i r e d f o r t h e f a c t o r y o p e r a t i o n
i n c l u d e e l e c t r i c i t y and w a t e r s u p p l y . Water i s o b t a i n a -
b l e l o c a l l y t h r o u g h t h e b o r e h o l e s i t u a t e d n e a r t h e l o c a l
government h e a d q u a r t e r a t Afor - Oru -0gbe r o a d . There
a r e e x i s t i n g t a p s b e i n g s u p p l i e d w a t e r from t h e b o r e h o l e
i n t h e s i t e . A p r o v i s i o n i s t h e r e f o r e made f o r t h e
c o n s t r u c t i o n o f a 10 ,000 l i t r e o v e r head t a n k f o r w a t e r
s t o r a g e a t t h e f a c t o r y s i t e . The c o s t i s p u t a t W35,OOO.
Though t h e p roposed s i t e i s a l r e a d y hooked t o t h e
n a t i o n a l g r i d which w i l l s e r v e a s a major s o u r c e o f
power t h e r e i s a l s o a 50 KVA g e n e r a t i n g s e t a t t h e l o c a l
government l ieadquar te rs which i s e x p e c t e d t o be l i n k e d
t o t h e f a c t o r y s i t e t o meet t h e power n e e d s o f t h e
f a c t o r y i n c a s e s o f o c c a s s i o n a l power c u t s from t h e
p u b l i c power s u p p l y sys t em a s p r e s e n t l y e x p e r i e n c e d .
5 .6 PROJECT E N G I N E E R I N G
5 .6 .1 MACHINERY AND EQUIPbENTS
When t e c h n o l o g y s e l e c t i o n and P l a n t c a p a c i t y d e c i s i o n
has been comple ted , it i s e s s e n t i a l t o make d e c i s i o n
a b o u t t h e r i g h t machinery and equipment t o b e s e l e c t e d .
The equipments and machinery r e c t ' ,?nded f o r t h e p r o -
d u c t i o n w i l l work f o r a p e r i o d o ve y e a r s w i t h o u t
any a n t i c i p a t e d breakdown and i n t e r u p t i o n i n t h e
p r o d u c t i o n p r o c e s s . 0
A p r o c e s s a n a l y s i s has been comple ted and t h e f o l l w i n g A
p r o d u c t i o n equipment s e l e c t e d and recommended f o r t h e
proposed p l a n t ;
( a ) Soap Mixer: Here two t y p e s , t h e k e t t l e and t h e
b a t c h r e a c t o r f o r soap making a r e recommended. These
equipments a r e s e l e c t e d because o f t h e f u l l b o i l e d p r o c e s s
o f t h e b a t c h p r o c e s s o f p r o d u c t i o n adop ted f o r t h e f a c t o r y .
A b r i e f d e s c r i p t i o n o f t h e two equipments a r e g iven below.
( i 1 K e t t l e : Th i s i s c y l i n d e r i c a l w i t h cone bot tom - equ iped w i t h d e l i v e r y p i p e s f o r f a t , w a t e r , l y e , b r i n e
and n i g r e . A swinging s u c t i o n o r ' skimmer1 p i p e
o p e r a t e d from t o p i s i n s t a l l l e d t o p e r m i t d r a i n i n g o f f
t h e c o n t e n t s t o any d e s i r e d l e v e l and i n t h e bo t tom,
a n o t h e r l i n e i s p rov ided f o r wi thdrawing t h e r e s i d u e
l e f t f o r skim ming. The k e t t l e i s u s u a l l y l a g g e d '
t o conse rve h e a t . Open s team c o i l s i n t h e cone s e c t i o n
supp ly h e a t a g i t a t e t o t h e c o n t e n t s .
The k e t t l e i s shown below:- K e t t l e f o r soap
makinq by t h e f u l l
bo i l ed . p r o c e s s .
KEY : - 1 - Steam. i n l e t f o r t h e p e r f o r a t e d steam c o i l .
2 Steam f o r a g i t a t i o n .
3 - Swing p i p e f o r pumping ou t t h e soap
4 - Run o f f f o r l y e l i q u o r and g l y c e r i n e l i q u o r
( i i ) The second type i s t h e Batch Reactor . I t i s
c y l i n d e r i c a l t ank wi th a base f o r d i r e c t h e a t i n g . From
t h e base o f c y l i n d e r through t h e f i r e box i s connected
a p ipe f o r removal o f t h e l ye . The equipment has a mech-
a n i c a l a g i t a t i o n system f o r mixing t h e c o n t e n t s of t h e
soap dur ing t h e p rocess . I n t h e ca se , t h e source o f
hea t aan be c o a l , f i rewood o r t h e l i k e . I f coa l o r
firewood i s t o be used, an exhaus t p ipe i s provided a t
t h e o t h e r s i d e o f t h e h e a t i n g base t o remove t h e exhaust
gases . The equipment i s shown below;
Bgtch Reactor
f o r Soap Making .
KEY : - 1 - Mechanical A g i t a t o r
2 - Soap tank
3 - Heat base
4 - Opening f o r hea t
S U P P ~ Y 5 '- Pipe f o r removing l y
6 - Tap.
Fig . 5.4 '
;8:7
Any of t h e mixers d e s c r i b e d above can be used i n t h i s
p r o j e c t .
Other equipments recommended f o r p roduc t i on a r e : - - The 38cm by 5.5cm s t e e l soap mould t h e dimension o f
t h e soap mould was determined u s i n g t h e s t a n d a r d
s p e c i f i c a t i o n s o f b a r and l aundry saops .
- C u t t e r f o r c u t t i n g t h e soap mould i n t o a p p r o p r i a t e
s i z e s .
- The s tamping machine f o r i n s c r i b i n g t h e brand name.
A l l t h e equipments a r e des igned and f a b r i c a t e d
l o c a l l y and does n o t i nvo lve any i m p o r t a t i o n . They a r e
l o c a l l y a v a i l a b l e and ea sy t o o p e r a t e . They can a l s o
be s e r v i c e d and r e p a i r e d l o c a l l y by l o c a l f a b r i c a t i n g
e x p e r t s . In fo rmat ion on t h e a v a i l a b i l i t y o f t h e s e
equipments can be g o t from t h e chamber o f Commerce,
M i n i s t r y o f I n d u s t r i e s and Technology and P r o j e c t
Development I n s t i t u t e .
I n a d d i t i o n t o t h e p roduc t i on equipments , t h e
fo l l owing o f f i c e equipments a r e needed:-
- F u r n i t u r e s
- E i g h t C e i l i n g Fans
- One a i r c o n d i t i o n e r
- One pick-up van
A breakdown of f u r n i t u r e s i s a s f o l l ows : -
3 Executive t a b l e s
3 Execu t ive Cha i r s
2 Ordinary c h a i r s
2 Padded long chakrs .
TABLE MACHINERY AND EQUIPMENT COST REQUIREMENT
PRODUCTION EOUIPMENT COST ESTIMATE
Soap Mixer
Soap Mould
C u t t i n g Machine
Stamping Machine 5,000
Motor Vehic le 250,000
O f f i c e Equipments
E igh t C e i l i n g Fans
One A i r c o n d i t i o n e r
One F i l l i n g Cabinet 20,000
Fu rn i t u r e s ,
I n s t a l l a t i o n 4
T o t a l Equipment and I n s t a l l a t i o n c o s t . ------ -,W45Q*QQQ---- -------
5.6.2 TECHNOLOGY AND PRODUCTION PROCESS:
The technology t o be adopted i n t h e p roduc t i on p r o c e s s
i s s imple and does n o t i nvo lve s o p h i s t i c a t i o n c o n s i d e r i n g
t h e t ype of equipments s e 2 e c t e d e a r l i e r . .
The product i .on p r o c e s s i t s e l f i s t h e sequence
of o p e r a t i o n s , moves and i n s p e c t i o n s by which raw
m a t e r i a l s i n p u t a r e conver ted i n t o f i n i s h e d p r o d u c t s
r eady f o r t h e consumer. For t h i s p r o j e c t , t h e b a t c h
p r o c e s s o f soap making i s s e l e c t e d . The main r e a s o n s
f o r s e l e c t i n g t h i s p r o c e s s a r e a s foll .ows: -
- I t o f f e r s f l e x i b i l i t y of o p e r a t i o n
- I t does n o t i n v o l v e s o p h i s t i c a t i o n b o t h i n
equipments and t echno logy .
The b a t c h p r o c e s s a s p e c t o f soap manufac tu r ing
i s o f f o u r k i n d s : -
( a ) F u l l k e t t l e b o i l e d p r o c e s s
(b) Semi k e t t l e b o i l e d p r o c e s s
( c ) Cold p r o c e s s s a p o n i f i c a t i o n
(d) J e t p r o c e s s s a p o n i f i c a t i o n
Out o f t h e s e f o u r k i n d s , t h e f u l l k e t t l e b o i l e d
p r o c e s s i s s e l e c t e d and recommended f o r t h i s p r o j e c t .
T h i s p r o c e s s i s p r e f e r r e d t o t h e o t h e r t h r e e because it
produces h igh g rade soap u n l i k e o t h e r s t h a t produce
l e w g rade soap. The p r o c e s s i s b r i e f l y d e s c r i b e d i n
t h e n e x t page .
FULL KETTLE R O O I L E D PROCESS
I n t h i s method, s a p o n i f i c a t i o n i s c a r r i e d o u t
s imply by c h a r g i n g t h e p r o c e s s e d o i l o r f a t t o t h e r e a c t o r ,
h e a t i n g t o 90 - 9 5 ' ~ , add ing o f r e f i n e d c a u s t i c I
soda s o l u t i o n u s u a l l y 35% c o n c e n t r a t i o n o r o t h e r
s u b s t i t u t e ( p o t a s h ) i n t e r m i t t e n t l y ' d u r i n g t h e c a u s e
o f r e a c t i o n and s t i r r i n g u n t i l t h e r e a c t i o n i s over .
S a t u r a t e d sodium c h l o r i d e s o l u t i o n ( b r i n e )
35% (W/V) Nacl i s u s u a l l y used i n t h e s a l t i n g o u t
o p e r a t i o n .
T h i s p r o c e s s s u p p l i e s comple te ly s a p o n i f i t a d
n e u t r a l soap c o n t a i n i n g approx imate ly 30% w a t e r ,
a compos i t ion which when h o t can be pumped t o v a r i o u s
f i n i s h i n g o p e r a t i o n s such a s : -
- Removal o f l y e
- Washing change
- S t r o n g change
- F i t t i n g change.
The advan tages f o r u s i n g t h i s method a r e : -
(1) I t produces h i g h g rade soap and i s used i n l a r g e
s c a l e p r o d u c t i o n .
( 2 ) I t p r o v i d e s f l e x i b i l i t y o f o p e r a t i o n .
(3) I t i s n o t h i g h l y mechanised, r e q u i r i n g low s k i l l e d
l a b o u r
( 5 ) Can be changed from one formula t o a n o t h e r w i t h o u t
t h e reworking o f s u b s t a n t i a l q u a n t i t i e s o f soap .
The u n i t o p e r a t i o n s ( p h y s i c a l changes) and u n i t
p r o c e s s e s (chemical changes) a r e a s f o l l o w s : -
- S a p o n i f i c a t i o n
- ' Sepa ra t ion
- Washing
- Re-Saponif i c a t ion
- F i t t i n g
- Moulding and packag ing
These o p e r a t i o n s and p r o c e s s a r e d e s c r i b e d below: -
SAPONIFICATION: I n t h i s o p e r a t i o n s , s a p o n i f i c a & i o n
i s - . c a r r i e d o u t by c h a r g i n g t h e r e f i n e d palm k e r n e l
o i l t o t h e r e a c t o r ( S a p o n i f i e r ) h e a t i n g t o 90-9.S0c,
add ing of r e f i n e d c a u s t i c soda s o l u t i o n u s u a l l y 35%
o r o t h e r s u b s t i t u t e (Potash) i n t e r m i t t e n t l y d u r i n g t h e
c o u r s e o f r e a c t i o n and a g i t a t i n g u n t i l t h e r e a c t i o n
i s o v e r . The m i x t u r e i s b o i l e d t o g e t h e r e a t a t e m p e r a t u r e
o f abou t 1050C
9%' A v igorous chemical r e a c t i o n t a k e s p l a c e and a
g r e a t d e a l o f h e a t i s gene ra t ed . The r e s u l t i n g t u r b u l e n c e
causes t h e mass o f l i q u i d t o s w e l l and heave. The mass
g r a d u a l l y t h i c k e n s o r e m u l s i f i e s a s t h e c a u s t i c soda
r e a c t s wi th o i l t o produce soap and g l y c e r o l . Water
and b r i n e a r e u s u a l l y added t o keep t h e mix tu re manageable
Towards t h e end o f t h e p r o c e s s , t h e c o n t e n t s a r e b o i l e d
up t o en su re t h a t no pocke t s o f o i l o r a l k a l i remain
i s o l a t e d . A t t h e conc lus ion o f t h e p roce s s a l l t h e o i l
and a l k a l i have been conver ted i n t o soap mixed.r.with a
p r o p o r t i o n o f b r i n e and g l y c e r o l .
SEPARATION PROCESS: In S e p a r a t i o n o f g l y c e r o l from
soap ( s a l t change) , t h e p a s t y b o i l i n g mass i s t r e a t e d
w i th h o t s t r o n g b r i n e . Cbntents o f t h e k e t t l e s a l t ou t
o r s e p a r a t e i n t o an upper l a r g e t h a t i s a curdy mass o f
impure soap and a lower l a y e r t h a t c o n s i s t s o f an aqueous
s a l t s o l u t i o n wi th t h e g l y c e r o l d i s s o l v e d i n i t . Thus,
t h e b a s i s o f g l y c e r o l removal i s t h e s o l u b i l i t y o f g l y c e r o l
and i n s o l u b i l i t y o f soap i n s a l t s o l u t i o n .
A f t e r t h e i n t r o d u c t i o n o f t h i s s a l t s o l u t i o n t h e
c o n t e n t s o f t h e k e t t l e i s al lowed t o s t a n d f o r 3 - 4
hours t o a l low complete s e p a r a t i o n o f t h e two phase s ;
t h e s l i g h t l y a l k a l i n e s a l t s o l u t i o n termed spen t soap l y e ,
i s d ra ined o f f through t h e t a p . A t t h e bottom of t h e
k e t t l e l e av ing impure soap i n molten form.
WASHING OPERATION: Here, t h e washing ope ra t i ons a r e
c a r r i e d ou t f o r t h e purpose of f u r t h e r removing g l y c e r o l
from t h e soap mass. A f t e r t h e removal of t h e l y e from
t h e s a l t change, t h e g ra ined soap i s b o i l e d wi th open
steam and wate r i s added u n t i l t h e mass i s i n a smooth
homogeneous cond i t i on . B o i l i n g i s cont inued and s a l t
i s added showly t o g r a i n ou t t h e soap.
The b o i l i n g mass i s expanded s e v e r a l t imes t o t h e
top of t h e k e t t l e wi th open system. This ensures
thoroughly mixing and maximum washing f o r g l y c e r o l
recovery. The steam i s shu t o f f and t h e k e t t l e al lowed
t o s e t t l e f o r s e v e r a l hours . A f t e r removing t h e f i r s t
wash l y e from t h e bottom of t h e k e t t l e , t h e g ra ined
soap i s given a second wash f o r t h e purpose of r e c o v e r i n g
more g l y c e r o l . Th is i s handled i n t h e same manner a s
t h e f i r s t wash desc r ibed e a r l i e r .
RE-SAPONIFICATION: In t h i s s t a g e of o p e r a t i o n , t h e
soap i s s u b j e c t e d t o a strongchange i n o r d e r t o conver t
t o soap any o i l o r f a t which was no t s apon i f i ed dur ing
t h e s a p o n i f i c a t i o n o r k i l l i n g change. In t h e t r e a t m e n t ,
s t r o n g c a u s t i c soda i s used and i s u s u a l l y run i n t o k e t t l e
and b o i l e d wi th t h e soap f o r a long t ime, about an hour .
94
The soap which i s n o t s o l u b l e i n t h e a l k a l i n e l i q u o r ,
a c q u i r e s a g r a i n y s t r u c t u r e , No recovery o f g l y c e r o l
i s aceqmplifked i n t h i s s t a g e . The a l k a l i r i c h l y e i s
run o f f a f t e r s e t t l i n g and used i n t h e s a p o n i f i c a t i o n
s tRge o f a new b o i l .
A f t e r t h i s o p e r a t i o n , t h e soap i s g iven one o r more
s a l t wa t e r washes t o reduce t h e f r e e a l k a l i c o n t e n t
o f t h e soap mass p r e p a r a t o r y f o r t h e f i n i s h i n g o p e r a t i o n .
Th i s o p e r a t i o n i s o p t i o n a l depending on t h e e f f i c i e n c y
o f t h e r e a c t o r and t h e raw m a t e r i a l s used. A f t e r t h i s
o p e r a t i o n , ' t h e two p roduc t s o f s a p o n i f i c a t i o n , soap
and g l y c e r o l a r e f u l l y s epa ra t ed . F u r t h e r t r e a t m e n t s
@nd performed t o b r i n g them t o t h e i r b e s t u s e f u l ends .
FITTING OPERATION (PURIFICATION STAGE) : Thi s i s t h e
f i n a l s t a g e of n e a t soap manufacture . I t s e r v e s t h e
dua l purpose o f r enok ing . , i m p u r i t i e s from t h e soap mass
and p e r m i t t i n g t h e p roduc t i on o f a f i n a l p roduc t"hav ing
t h e composit ion r e q u i r e d o r d e s i r e d .
T h i s s t a g e r e q u i r e d oons ide r ab l e s k i l l and shou ld
be hand led i n such a manner a s t o produce a h i g h y i e l d
o f n e a t soap and r e l a t i v e l y s m a l l amount o f n i g r e .
The impur i t ke s go i n t o t h e n i g r e upon t h e s e t t i n g o f t h e
f i n i s h e d soap.
A f t e r t h e l a s t wash l y e i s removed, t h e f i n a l
' f i t 1 t o t h e n e a t - s o a p i s begun. The curd c o n t a i n s
t o o much s a l t and o r c a u s t i c , so. it i s b o i l e d up and
sma l l q u a n t i t y o f wa t e r i s g radua l lyadded and b o i l e d
i n t o t h e d e s i r e d f i t . The c o n t e n t s of t h e r e a c t i o n
a r e a l lowed t o s e t t l e f o r 2 - 4 days by which t ime
t h e y w i l l have r e s o l v e d i n t o t h r e e l a y e r s - a t h i n
da rk n i g r e l a y e r i s formed between t h e upper l a y e r n e a t
soap and lower l a y e r ( n i g r e l y e ) .
A f t e r s e t t i n g , t h e upper n e a t l a y e r a l s o c a l l e d
k e t t l e soap which i s of most c o n s t a n t composit ion about
(70% soap and 30% wa te r ) i s withdrawn wh i l e s t i l l h o t
through t h e swing p i p e o r kimmer and pumped t o s t o r a g e
o r r e l a y t anks f o r f u r t h e r p r o c e s s i n g i n t o b a r s o r
t a b l e t s . Pumping i s s topped when t h e swing p i p e r eaches
t h e n i g r e l a y e r a t t h e bottom of t h e k e t t l e .
LAUNDRY SOAP: I n p roduc t i on o f household b a r soap o r
l aund ry soap , t h e n e a t soap i s d r i e d f u r t h e r . I n t h i s
p r o c e s s i n g , t h e pu re n e a t soap i s pumped from s t o r a g e
t ank i n t o cou t che r where a d d i t i o n s o f perfuiiies.',
c o l o u r i n g ( agen t s ) m a t t e r and s m a l l q u a n t i t y o f i n o r g a n i c
b u l d e r s a r e made. I t t h en runs i n t o f rames , t h a t i s ,
r e c t a n g u l a r s t e e l mould wi th removable ends and s i d e s
i n which it c o o l s and s e t i n t o s o l i d . When t h e soap
has been s o l i d i f i e d , t h e frames a r e removed by means
o f s t e e l w i r e s , t h e s l a b o r mould i s now c u t i n t o b a r s
and t a b l e t s which i s f i n 3 l l y stamped and packed.
PRODUCTION FLOW CHART
C U T T I N G
I N T O BARS
S T A M P I N G r+l
RAW MATERIALS i
PACKAGING ?
9 S O A P M I X I N G
PRODUCT I
& t -
t
1 . d
Figure 5.5
-4'
F I N A L F I N I S H E D
S O A P MOULD
6
5.6 .3 PRODUCTION SCHEDULE
The p r o d u c t i o n s c h e d u l e i s a s p e c i f i c manufac tu r -
i n g programme which i n v o l v e s p r o d u c t i o n f o r s a f e t y s t o c k
and r e f l e c t s e f f o r t s - :..to, o p e r a t e a t p l anned c o n s t a n t
p r o d u c t i o n r a t e . I t forms t h e b a s i s f o r a n a l y s i s
a n d , c o s t e s t i m a t i n g . A s e a r l i e r i n d i c a t e d , t h e proposed
p l a n t w i l l run a one s h i f t , e i g h t hours s c h e d u l e
p roduc ing a n ave rage o f two hundred (200) b a r s o f h i g h
g rade perfumed soap p e r day f o r t h e p r o j e c t e d 300
working days r e s u l t i n g t o t h e p r o d u c t i o n o f 60,000 b a r s
o f soap i n t h e f i r s t y e a r o f o p e r a t i o n . The p l a n t
i s e x p e c t e d i n i t i a l l y t o o p e r a t e a t abou t 70 p e r c e n t
o f i n s t a l l e d c a p a c i t y and a t % a i n s i t s maximum p r o d u c t i o n
l e v e l i n t h e f i f t h y e a r .
The proposed s c h e d u l e o f p r o d u c t i o n a l l o w s f o r a
g r a d u a l b u t p r o g r e s s i v e a b s o r p t i o n o f t h e e s t i m a t e d
p r o d u c t annua l ave rage s u p p l y gap - a p r o c e s s which i s
expec ted t o e n s u r e a g r a d u a l b u t s y s t e m a t i c improvement
on t h e p r o d u c t q u a l i t y and s a l e s network.
TABLE 5 . z THE PROPOSED SCHEDULE OF PRODUCTION
NO. OF 1 P I O ~ J $ C ~ ~ ~ s !LJTPVT SHIFT
YEAR OF PRODUCTION
1
2
3
4
5
I I
CAPACITY USAGE
70%
80%
80%
85%
100%
5.6.4 BUILDING NEEDS AND CIVIL WORKS
C o n s i d e r a t i o n i s g iven t o s t r u c t u r a l needs o f
t h e i n d u s t r y . I t i s recommended t h a t t h e b u i l d i n g s
f o r t h e p r o j e c t w i l l b e b u i l t w i t h r e i n f o r c e d c o n c r e t e
and cement b l o c k . The p r o d u c t i o n and s t o r a g e s e c t i o n s
w i l l have h i g h bays and adequa te columns f o r s u p p o r t .
The p r o d u c t i o n f l o o r w i l l be g iven s p e c i a l f l o o r i n g
t o s u p p o r t t h e p r o d u c t i o n equipment p l a n t . The r e s t
p a r t o f t h e p l a n t w i l l u se normal l i v i n g and o f f i c e
s p e c i f i c a t i o n s . The sum of W1.5m h a s been s e t a s i d e
f o r t h e b u i l d i n g needs . T h i s amount w i l l a l s o c o v e r
laAd development and c o n s u l t a n c y f e e s .
5 . 6 . 5 SPACE REQUIREMENTS
T h i s h v o l v e s t h e p r o d u c t i o n , o f f i c e and o t h e r
s e r v i c e r e q u i r e m e n t s .
PRODUCTION SPACE REQUIREMENTS
I n t h e p r o v i s i o n o f s p a c e , c o n s i d e r a t i o n h a s been
g iven t o expans ion p o s s i b i l i t i e s . The p r o d u c t i o n space
requ i rements i n c l u d e a l l space d i r e c t l y used i n t h e
p r o d u c t i o n . I t i n c l u d e s : - - Work S t a t i o n Areas
- S t o r a g e Areas.
( i )
( i i )
99
Work s t a t i o n Areas; This w i l l cover t h e a c t u a l
space occupied by machines and o t h e r p roduc t ion
equipments i n t h e f a c t o r y . The a r e a requirement
p r o j e c t e d i s pu t a t s i x t y f i v e (65) square metres .
S torage Areas: The s t o r a g e a r e a i s d iv ided i n t o
two s e c t i o n s . Warehouse f o r raw m a t e r i a l s and
s t o r e s f o r f i n i s h e d p roduc t s . Es t imate o f space
requirements f o r s t o r a g e i s p u t a t f o u r t y - f i v e
( 4 5 ) square metres .
5.6.5.2 OFFICE AND SERVICE SPACE REOUIREMENTS
( i ) Adminis t ra t ion : The p l a n t w i l l have admin is t ra tTve
o f f i c e . Th is w i l l accomodate t h e General Manager,
Adminis t ra t ive Manager, two s u p e r v i s o r s f o r
p roduc t ion and market ing, Accounts -of f ice r .
Est imated space r e q u i r e d f o r t h x s i s pu t a t t h i r t y
(30) square met res .
( i i ) P rov i s ion w i l l be made f o r a customer s e r v i c e
f a c t o r y depot. Est imated space i s twenty (20)
square metres .
( i i i ) P l a n t Se rv i ce s : This w i l l i n c lude space p r o v i s i o n
f o r shower, l a v a t o r y , t o i l e t . Space e s t i m a t e i s
pu t a t f i f t e e n (15) square metres .
U t i l i t y space And P r o t e c t i o n : Th i s i n c l u d e s
Space f o r c a r p a r k , f r o n t l oad ing , w a t e r t ank
and open cou r tya rd . Es t imated space r e q u i r e d e n t
i s p u t a t one hundred (100) square me t r e s .
TABLE 5 . 3 REQUIRED INDUSTRIAL LAND AR
CAP I TAL ITEMS
- Fac tory S i t e compris ing Produc t ion /
Worksta t ion Area, Warehouse f o r raw
m a t e r i a l s , Water S to r age t a n k , Area
f o r f u tu r eexpans io n and o f f l o a d i n g -
a r e a .
- Other b u i l d i n g s Comprising main
a d m i n i s t r a t i o n b l o c k , p l a n t s e r v i c e s
c a r p a r k s , s t o r e f o r f i n i s h e d goods
and l o a d i n g a r e a .
NOTE: The above l a n d a r e a i n c l u d e t h e a r e a f o r f u t u r e - I
expansion o f i n d u s t r i a l a c t i v i t i e s on t h e 3Lacre
l a n d p rov ided f o r i n d u s t r i a l purposes by t h e l o c a l
a d m i n i s t r a t i o n .
5.7 PLANT ORGANISATION AND OVERHEAD COST
5.7.1 PLANT ORGANISATION
T h i s i nvo lve s t h e g e n e r a l arrangement o f t h e
p roduc t i on and s t o r a g e and f r e e f low o f p roduc t i on
m a t e r i a l s . an'd pe rsonne l . The p l a n t w i l l be l a i d
o u t i n such a manner t h a t i t w i l l be i n l i n e w i th
t h e p roduc t i on p r o c e s s e s s and t echno logy adopted f o r
t h i s p r o j e c t .
A s e a r l i e r i n d i c a t e d , t h e p l a n t w i l l be d iv ided
i n t o p roduc t i on a r e a which w i l l comp?i%e t h e w o r k s t a t i o n
a r e a and t h e s t o r a g e a r e a , r e q u i r e d s p e c i f i c a t i o n
f o r t h e s e have e a r l i e r been given i n t h e space r e q u i r e -
ments t a b l e .
The s t o r a g e a r e a w i l l be d i v i d e d i n t o two made
up of raw m a t e r i a l s and f i n s i h e d goods s t o r e s . The
s t o r a g e a r e a w i l l be capab le of ho ld ing a h igh
pe r cen t age o f a l l t h e needed n e c e s s a r y raw m a t e r i a l s
t h e f i n i s h e d produc ts . t h e o t h e r hand, t h e
p roduc t ion a r e a w i l l -~onvenient ly ' . : accommodate t h e
machinery and equipments f o r p roduc t ion and a l s o a l low
enough space f o r f r e e movement o f pe r sonne l , goods and
maintenance.
Personnel w i l l be a s s igned i n r e l e v a n t a r e a s .
PLANT LAYOUT
b I
Raw M a t e r i a l s 1
S t o r e i
/n d
L.
Figure: 5 .6
I
Off l oad ing Area
w I i
Fin ished Goods
S t o r e
4 4
Product ion Area
Machinery & Equipments b
i
Parking And
Loading Area. 4
And Peronnel * I
4
K
10'3
5 .7 .2 OVEFWEAD COST
T h i s i n v o l v e s t h e c o s t o f runn ing t h e p l a n t . I t
w i l l cover t h e c o s t o f p r o v i d i n g c e r t a i n f a c i l i t i e s
p rov ided f o r runn ing t h e pZant l i k e t e l e p h o n e , e l e c t r i -
c i t y , w a t e r e t c .
The t o t a l overhead c o s t r equ i rement i s shown below:-
TABLE 5 . 5
OVERHEAD COST REQUIREMENT (ANNUAL) - I
ITEM I COST (W)
V e h i c l e Maintenace And F u e l i n g
Veh ic le I n s u r a n c e And R e g i s t r a t i o n
E l e c t r i c i t y
Water Supply
Fac to ry S u p p l i e s (Car tons )
S a n i t a t i o n Fee
Bus iness Premises
Contingency
Miscelaneous
NOTE: Th i s f i g u r e i s r e l e v a n t f o r t h e f i r s t one y e a r o f
o p e r a t i o n . A 5% annual i n c r e a s e i s assumed t o p r o v i d e
f o r r i s i n g c o s t o f l i v i n g .
5.8 MANPOWER REQUIREMENTS
This e v a l u a t e s t h e manpower needs of t h e p r o j e c t .
The s t a f f s t r e n g t h , S ~ X V and wage p l a n and t h e i r
i n d u s t r i a l f unc t ions were a l s o t aken c a r e o f he re . Th is
w i l l be ana lys6d i n two p a r t s o f t h e management team
and personne l requivements. I t a l s o decr ibeds an
o r g a n i s a t i o n a l s t r u c t u r e t h a t i n d i c a t e s ., t h e command
h i e r a r c h y t h a t should be most e f f i c i e n t i n running t h e
o r g a n i s a t i o n e f f e c t i v e l y . I
5.8.1 MANAGEMENT TEAM: To ensu re t h e success o f an
i n d u s t r i a l p r o j e c t , p roper a t t e n t i o n must be given t o
t h e importance of management. Management can be def ined
a s t h e sum t o t a l of t h e p o l i c y d e c i s i o n s t h a t a f f e c t
t he f u n c t i o n s of an o r g a n i s a t i o n . I f t h e d e c i s i o n s
a r e c o r r e c t and taken a t t h e r i g h t t ime , management
i s s a i d t o be e f f i c i e n t . But where d e c i s i o n s a r e wrong
o r t aken a t t h e wrong t ime , management may become
i n e f f i c i e n t .
The management team f o r t h i s p r o j e c t wi l l compr i se
t h e General Manager, t h e Admin i s t r a t i ve and Personnel
Manager, t h e two S u p e r v i s i o r s a n d . t h e Technica l s t a f f
and t h e c o u n c i l l o r incharge of f i nance and economic
planning. The i r d u t i e s . w i l l i n c lude : - - Advise t h e General Manager on new t ech iques f o r
maximum f a c i l i t i e s u t i l i z a t i o n .
i05
- Provide u s e f u l in format ion on imLproved produc t ion
methods . - Formulate a p p r o p r i a t e p o l i c y g u i d e l i n e s i n l i n e w i th
t h e l o c a l a d m i n i s t r a t i ons requirements .
- P r o j e c t t h e company i n t h e f o r e f r o n t of s i m i l a r
i n d u s t r i e s i n t h e course o f t h e i r r o u t i n e engagements.
They should meet q u a r t e r l y and be p a i d remuneration
based on an as reedpercen tage of p r o f i t a f t e r t ax .
5 . 8 . 2 PERSONNEL REQUIREMENTS: The p l a n t w i l l i n t h e
f i r s t yea r of commercial ope ra t i on employ t h e s e r v i c e s o f
t h e fo, l lowing pe r sonne l s .
- General Manager
- Administrative/Personnel Manager
- Superv i sors
- Technical S t a f f
- Accounts O f f i c e r
- Driver Salesmad?
- Depot Sa l e s l ady
- Factory workers.
5 .8 .3 J O B DESCRIPTION AND QUALIFICATION
( i ) General Manager:- He i s t h e c h i e f execu t ive o f t h e
industr?:. He should pos se s s a B.Sc. i n p roduc t ion Engineer ing
wi th a t l e a s t f o u r y e a r s co:gnate manager.ia1 exper ience .
He w i l l be r e s p o n s i b l e f o r t h e day t o day running of t h e
p l a n t . He w i l l d i r e c t and c o n t r o l t h e f u n c t i o n s of o t h e r
members o f t h e management who w i l l r e p o r t d i r e c t l y t o
him. He i s r e s p o n s i b l e t o t h e management team wh6 makes
recommendation t o t h e chairman.
ADMINISTRATIVE/PERSONNEL MANAGER: He should be r e s p o n s i b l e
f o r t h e gene ra l a d m i n i s t r a t i v e and personne l requirements
of t h e i n d u s t r y . He should posses a H N D / B . S C i n Business
Adminis t ra t ion wi th t w ~ y e a r s cognate exper ience . He
should r e p o r t t o t h e General Manager.
SUPERVISORS: They w i l l be two i n number and w i l l s upe rv i se
t h e p roduc t ion and s a l e s r e s p e c t i v e l y . The Supe rv i so r
f o r s a l e s w i l l co -ord ina te s a l e s o f t h e f i n i s h e d p roduc t s
whi le t h e product i n s u p e r v i s o r w i l l oversee t h e f u n c t i o n s
o f t h e f a c t o r y workers and o v e r a l l p roduc t ion p roces s .
They should pos se s s a HND/B.Sc i n r e l e v a n t a r e a s wi th
two y e a r s cognate exper ience . They r e p o r t t o t h e General
Manager.
T E C H N I C A L STAFF:- W i l l s ee t o t h e t e c h n i c a l and mainte-
nance of t h e p roduc t ion equipments. He should pos se s s
a B.Sc/HND i n Mechanical Engineer ing and w i l l l i a s e wi th
p roduc t ion s u p e r v i s o r and r e p o r t t o t h e General Manager.
ACCOUNTS DFFICER: W i l l be r e s p o n s i b l e f o r t he genera l
accounts o f t h e indust r* . He w i l l r e c e i v e and make
payments on beha l f of t h e o r g a n i z a t i o n and r e p o r t d i r e c t l y
t o t h e General Manager. He should pos se s s a B.Sc/HND
i n accounts .
DRIVER/SALESMAN: W i l l be r e s p o n s i b l e t o t h e d e l i v e r y o f
t h e f i n i s h e d goods t o p o t e n t i a l customers and consumers.
He i s expec t ed t o c a r r y t h e p roduc t s t o t h e major
markets i n t h e a r e a f o r d i r e c t s a l e s t o t h e f i n a l
consumers. He shou ld pos se s s a minimum of WASC and a l s o
an. ' E l g rade d r i v i n g l i c e n c e w i t h f o u r y e a r s d r i v i n g
expe r i ence . He w i l l r e p o r t t o t h e s a l e s s u p e r v i s o r .
DEPOT SALES LADY: Should be r e s p o n s i b l e f o r s a l e s a t t h e
f a c t o r y depot . She shou ld be c h a r i s m a t i c and pos se s s a
minimum of WASC o r GCE. She should r e p o r t d i r e c t l y t o
t h e S a l e s Supe rv i so r .
FACTORY WORKERS: These a r e t h e a c t u a l peop le invo lved
t h e d i r e c t p roduc t ion . They shou ld p o s s e s s t h e WASC o r
Primary S i x C e r t i f i c a t e and w i l l r e p o r t d i r e c t l y t o t h e
p roduc t i on Supe rv i so r .
TABLE 5.6
Admin/Personnel Manager 3 , 500 1 42,000
MANPOWER REQUIREMENT COST FORECAST
Supe rv i so r s
Accounts O f f i c e r
DESIGNATION
General Manager
NO
1
, . Technica l S t a f f
Dr iver lSalesman
Depot S a l e s l a d y
Fac to ry Workers
TOTAL
( W ) MONTHLY SALARY
5,000
3
1
. . ."lo
( W ) ANNUALSALARY
60,000
2,800
1 ,000 , . , . ' ." .. .. . '
Pi18,700
33,600
12,000 . . 108',000
Pi357,600
NOTE: This f i g u r e i s r e l e v a n t f o r t h e f i r s t $wo-yeir of - commercial ope ra t i on . Ten (10) pe rcen t i n c r e a s e i n
s a l a r y i s recommended'in t h e t h i r d y e a r o f o p e r a t i o n .
5 . 8 . 4 . . -- ORGANISATIONAL STRUCTURE: The o r g a n i s a t i o n a l
s t r u c t u r e i n d i c a t e s t h e h i e r a r c h y t h a t should be adopted
f o r t h e most e f f i c i e n t way of running t h e o r g a n i s a t i o n
e f f e c t i v e l y . A s e a r l i e r i n d i c a t e d t h e General Manager i s
t h e ch i e f execu t ive and d i rec t s . ':and c o n t r o l s t h e a f f a i r s
of t h e o r g a n i s a t i o n . Below t h e General Manager a r e , t h e ; '
Admin/Personnel Manager, t h e Supe rv i so r s , Accounts o f f i c e r .
Driver/S&lesman, S a l e s l a d y , t e c h n i c a l s t a f f and f a c t o r y
workers.
F ig .5 .7
THE ORGANISATIONAL STRUCTURE
General Manager
Technical S t a f f LC 1 s u p e r v i s o r I ( Superv i sor I
I 4 i
Accounts
O f f i c e r z
1 Sa le s I I
t r *
Admin/Personnel
Manager v
( produc t ion I
1 11
Driver /Sa les Man
Depot
L
5.9 . IMPLEMENTATION SCHEDULE
The implementa t ion s chedu l e i n c l u d e s a l l t h e a c t i v i -
t i e s invo lved i n t h e p r o j e c t work and t h e worked o u t
p e r i o d f o r a ch i ev ing them. I t i s a work p l a n f o r a ch i ev ing
t h e complet ion o f t h e p r o j e c t w i t h i n t h e s e t t ime frame.
The implementa t ion schedu le i s a s o r t o f guide i n p r o j e c t
implementa t ion .
Fo reca s t o f p r o j e c t implementa t ion schedu le f o r t h e
proposed p r o j e c t i s shown below.
TABLE 5 . 7
FORECAST OF PROJECT IMPLEMEYTATI ON SCHEDULE ,
1. Bu i ld ing C o n s t r u c t i o n l 1 Long term I
PROGRAMME OF SOURCE OF
PROJECT IMPLEMENTATION
ESTIMATED
FUND
C i v i l Eng ineer ing Works
DURATION
2 . Purchase o f Machinery
And Equipment And t h e i r
I n s t a l l a t i o n
Loan
Long term , Loan
3 . S t a f f Recuitment
1 2 months
Equ i t y C a p i t a l I 2 months
4 . Purchase of Raw
M a t e r i a l s
* F i r s t month o f t h e fo l l owing yea r .
5. T e s t P roduc t i on I
NOTE: The p r o j e c t implementa t ion i s e s t i m a t e d t o l a s t f o r - o w - yea,x.
Equ i t y And r ,
S h o r t te rm Loan
1 month
2 months
1
* S t a r t up o f Commercial Opera t ion
iio 5 . 1 0 WORKJNC CAPITAL
The working c a p i t a l e s t i m a t e i s based on t h e manufac t -
u r i n g programme and on t h e e x p e r i e n c e o f an i n d u s t r y o f
s i m i l a r o p e r a t i o n s i n t h e s t a t e . Owkn-g..to r i s i n g c o s t
o f l i v i n g we have p r o v i d e d f o r an e s t i m a t e d 5 % a v e r a g e
annual i n c r e a s e i n working c a p i t a l a s from t h e second
y e a r o f commercial o p e r a t i o n and p r o d u c t i o n . The r e a s o n
f o r u s i n g s h o r t p e r i o d s s t o c k i s t o a v o i d s a d d l i n g t h e
.Fh. p r o j e c t w i t h heavy working c a p i t a l i n i t i a l l y s i n c e t h e ;, -7 -, , .
, - 7 , -: p r o j e c t from my p r o j e c t i o n s , s t a r t s t o g e n e r a t e : i t s own&v&nue.
r i g h t from t h e f i r s t y e a r o f commercial o p e r a t i o n s .
S e c o n d l y , most o f t h e raw m a t e r i a l s r e q u i r e m e n t s
o f t h e p roposed f a c t o r y c o u l d b e s o u r c e d l o c a l l y .
TABLE 5 . 8
WORKING CAPITAL ESTIMATE ( W '000)
taw m a t e r i a l s 2 months
; t o c k
;tack o f Work i n P r o -
:ess 2 days v a l u e o f
tnnual s a l e s
;tack o f f i n i s h e d
p o d s 1 week o f t o t a l
m n u a l s a l e s
Deb to r s : 1 4 days v a l u e o f t o t a l annua l s a l e s
L__I
YEAR 0
YEAR i
-3mJ-
16
56
1 1 2
YEAR
YEAR ii
130
19
69
134
YEAR iii
136
2 0
70
140
YEAR i v
152
2 2
78
156
YEAR
76-
27
96
192
S a l a r y And wages f o r 1 I I two months
I
Less C r e d i t o r s : 1 5 days
s tock of raw m a t e r i a l s 2 7 3 2
Net To ta l 302 355
Inc rease In working
c a p i t a l - 5 3
5.11 FINANCIAL ANALYSIS
F inanc i a l a n a l y s i s p l a y s an important r o l e i,n t h e p roces s not
of t h e p r o j e c t a p p r a i s a l which shows whether or,,the p r o j e c t
i s f i n a n c i a l l y v i a b l e and p r o f i t a b l e i n t h e given soc io -
economic environment. The f i n a n c i a l in format ion i s u s u a l l y
enough t o i n t e r e s t p o t e n t i a l i n v e s t o r s who, once they have
been i d e n t i f i e d can be provided wi th more d e t a i l e d d a t a
t a i l o r e d t o t h e i r needs. The in format ion con ta ined i n
t h e f i n a n c i a l a n a y l s i s can be used t o determine i f t h e
p r o j e c t shows an accep tab l e l e v e l o f commercial p r o f i t a b i l i t y .
For t h e purpose of t h i s p r o j e c t , t h e f i n a n c i a l a n a y l s i s
w i l l cover t h e fo l lowing a r e a s : -
( i ) Es t imate o f t o t a l p r o j e c t c o s t .
( i i ) P ro j ec t ed Income Sta tement .
( i i i ) P r o j e c t e d Cash Flows Sta tement .
( i v ) P r o j e c t e d Balance Sheet .
(v) Return On Investment
( v i ) Payback Per iod .
TABLE 5.9
5 . 1 1 . 1 ESTIMATE OF TOTAL PROJECT COST (INITIAL)
The p r o j e c t e d i n i t i a l t o t a l p r o j e c t c o s t covers
t h e fo l lowing i tems :-
ITEMS OF EXPENDITURE ESTIMATED COST (W) . Bui ld ing and C i v i l works 1,500,000
Machinery And Equipments 450,000
Pre- investment Cos t s 50,000
Working C a p i t a l ( 1 yea r ) 302,000 1 P a r t T o t a l W2,302,000
P lus 5% contingency p rov i s ion 115,100
Grand T o t a l W2,417,100
The t o t a l e s t ima ted c o s t o f i n i t i a l investment s t a n d s
a t W2,417,100. Consider ing t h e reasonable cont ingency
p r o v i s i o n made a v a i l a b l e , i n t h e investment f o r e c a s t , we
b e l i e v e t h e r e w i l l be no s p i l l over i n t h e a c t u a l c o s t o f
In working ou t t h e f i n a n c i n g p l a n f o r t h e proposed
p r o j e c t . We a r e guided by t h e requirements o f many
i n s t i t u t i o n s i n t t h e coun t ry which p rov ide medium and I
long term loans . The promoters ' of t h e prefect cou ld
r a i s e a substant .5~1 p a r t o f t h e i r l o a n requ i rements ' f o r
t h e ven tu r e from t h e N ige r i an Bank f o r Commercedi and
I n d u s t r y (NBCI). ' The NBCI does n o t i n s i s t on any h i g h
c a p i t a l gea r i ng r a t i o and r ecogn i s e s t h e f a c t t h a t i t
i s t h e e f f e c t t h a t t h e g e a r i n g has an t h e p r o j e c t s
p r o f i t a b i l i t y and l i q u i d i t y t h a t i s impor tan t and n o t
t h e gea r i ng p e r s e . The NBCI i s t h e r e f o r e p r epa red t o
c o n s i d e r any c a p i t a l g e a r i n g p r o p o s i t i o n submi t t ed t o i t
on i t s m e r i t .
The p r o j e c t i n i t i a l c o s t o f W2,417;100 w i l l be
f i n a n c e d - a s f o l l ows : -
Equ i t y - - Wl,OOO,OOO
Long term loan=W1,000~000 .
Shor t te rm loan'=W417,100
EQUITY SHARE: The t o t a l proposed e q u i t y s h a r e o f t h e
p r o j e c t s t a n d a t W1,000,000. This w i l l be used t o
f i n a n c e Pre - inves tment c o s t , s t a f f r e c r u i t m e n t and p a r t l y
t h e f i x e d a s s e t s inves tment .
SHORT TERM LOAN: The s h o r t t e rm l o a n i s p u t a t W417,000,
cou ld be secured from t h e N ige r i an Bank f o r Commerce
and I n d u s t r y . Th i s w i l l f i a n c e t h e working c a p i t a l and
cont ingency p r o v i s i o n .
LONG TERM LOAN: The long t e rm loan e s t i m a t e d a t W1,000,000 J
i s t o be p rov ided a l s o by t h e N ige r i an BtZriIc f o r Commerce
and I n d u s t r y . The long term l o a n i s expected t o f i nance
p a r t l y t h e machinery and equipment, bu i ld i -ng needs and
o t h e r r equ i rements f o r t h e proposed f a c t o r y .
In view o f t h e compara t ive ly low i n v e s t m e n t , r i s k s
a s s o c i a t e d w i t h t h e p r o j e c t , we c o n s i d e r t h i s f i n a n c i a l
s t r u c t u r e s a t i s f a c t o r y and we hope it w i l l be a c c e p t a b l e
t o i n s t i t u t i o n a l i n v e s t o r s p a r t i c u l a r l y t h e N B C I t h a t
w i l l be approached by p r o j e c t sponsors f o r l aon c a p i t a l .
The long term loan i s proposed t o be s ecu red w i t h e x i s t i n g
a s s e t s o f t h e c l i e n t and a d d i t i o n a l f i x e d a s s e t s t o be I acqu i r ed by same. - 5.11,3 LOAN REPAYMENT: Repayment o f long term loan - w i t h i n a 5 - y e a r p e r i o d on equa l annual i n s t a l m e n t s w i t h
one y e a r moratorium and a y e a r l y i n t e r e s t charge o f 2 1 %
i s recommended. Th i s cou ld be an a c c e p t a b l e l end ing
i n t e r e s t r a t e by development banks l i k e N B C I i n t h e preferred ,
s e c t o r s o f t h e c o n t r y ' s economy. The o b j e c t i v e unde r ly ing
t h e proposed f i v e - y e a r repayment p e r i o d i s t o enab l e
t h e p r o j e c t acqu i re \ ' adequa te f i a n c i a l r e s o u r c e s n e c e s s a r y
f o r growth. The one y e a r moratorium proposed covered
t h e e s t i m a t e d b u i l d i n g c o n s t f x c t i o n pe r i od .
TABLE 5.10
ESTIMATED INTERESTS AND BANK CHARGES
YEAR INTEREST PRINCIPAL CAPITAL OUTSTANDING W ' 000 W '000 W'OOO
5.11.4 DEPRECIATION
The d e p r e c i a t i o n method used i s l i n e a r d e p r e c i a t i o n 1
over a p e r i o d equa l t o t h e e s t ima ted l i f e o f a s s e t : Twenty
(20) y e a r s f o r b u i l d i n g and C i v i l works, f i v e (5) y e a r s
f o r machinery and equipments f o u r (4) y e a r s f o r motor
v e h i c l e ( f a i r l y used)' and f i v e ( 5 ) y e a r s f o r pre- investment
c o s t . Tota l d e p r e c i a t i o n i s pu t a t W187,500. Asse t s w r i t t e n
o f f and cons idered no longe r s e r v i c e a b l e could be renewed f o r
f u r t h e r ope ra t i ons . But pre- investment c o s t s which do n o t
g e n r a a l l y c o n s t i t u t e a r e c u r r e n t i tem of expendi tu re i n
investment p r o j e c t s such a s t h i s p a r t i c u l a r p r o j e c t may r e q u i r e
no f u r t h e r p rov i s ion a f t e r t h e wr i t t ng -o f f . . pe r iod .
Table 5 .11
FORECAST ANNUAL DEPRECIATION I
B u i l d i n g s And C i v i l Works
CAPITAL ITEM
Machinery And Equipments
ANNUAL DEPRECIATION(W)
Motor Veh ic le
T o t a l I W187,500
Pre - inves tment Cost
5 .11 .5 PROJECTED INCOME STATEMENT (PROFIT AND LOSS ACCOUNT)
The f o r e c a s t o p e r a t i n g s t a t e m e n t o f t h e p r o j e c t f o r
t h e f i r s t f i v e y e a r s o f o p e r a t i o n i s shown below.
10 ,000
The f o r e c a s t t r a d i n g account was based on t h e proposed
s c h e d u l e o f p r o d u c t i o n o f t h e r e l e v a n t p r o d u c t s a t
t h e average e s t i m a t e d p r i c e o f W40. An average annual
i n c r e a s e o f 5 % i n t h e s e l l i n g p r i c e i s f o r e c a s t a s from
t h e second y e a r o f o p e r a t i o n t o match w i t h a p o s s i b l e
e s t i m a t e d cor respond ing r i s e i n t h e c o s t s o f t h e
n e c e s s a r y i n p u t .
FORECAST PROFIT AND LOSS LOSS ACCOUNT BASED ON THE PROPOSED
TABLE 5.12 PRODUCTION SCHEDULE , ( W ' 000) ,
I I I I I
S a l e s o f soap a t
average p r i c e o f W40
ESTIMATED INCOME FROM OPERATIONS
I 1 1 I 1
T o t a l Gross S a l e s 1ncorne12,400 1 2,879 1 3,023 1 3,366 14,
YEAR 1
Opera t ing Costs
Raw m a t e r i a l s
S a l a r i e s And Wages
Overhead Expenses
- 5.11.6 CASH FLOW PROJECTIONS
This s t a t emen t p r o v i d e s u s e f u l i n fo rma t ion r e g a r d i n g
YEAR 11.
T o t a l Opera t ing Cos t s
P r o f i t Before Tax
Less Company Income Tax
a t 30%
Net p r o f i t
l i q u i d i t y p o s i t i o n o f an e n t e r p r i s e ? I t shows changes
I
540
357
163
occur ing i n t h e cash p o s i t i o n o f an e n t e r p r i s e over a p e r i o d
1
YEAR 111
Finance Bank Charges (21%
I n t e r e s t on term l a a n i 507
Dep rec i a t i on 187
o f t ime. I n o t h e r words, it d e p i c t s whether o r n o t i n t e r n a -
647
557
171
1,756
643
193
450
l l y gene ra t ed funds a r e s u f f i c i e n t t o meet o b l i g a t i o n s ,
YEAR:.rv
269
187
1,634
1 ,244
373
871
working c a p i t a l r equ i rements and payment o f d iv idened t o
Y s
680
393
180
1,l
2 ,
1,
1 ,678
1 ,345
403
942
s h a r e h o l d e r s .
758
432
189
326
1,764
1 ,601
4 80
1 , 1 2 1
198
187 1 187
TABLE 5 *'I3
FORECAST OF CASH
SOURCE OF FUNDS -
Commercial Bank
Overdra f t
Long term loan
Equi ty C a p i t a l
Deprec ia t ion
Net P r o f i t
T o t a l
App l i ca t i on Of Fur
Repayment o f Long
term loan
Inc rease In Work-
i ng C a p i t a l
Investment
Inc rea se o r
LOW PROI
YEAR 0 ACTUALS
1 4 7
1000
1000
In Funds Available1 - Tota l
Cash Surp lus
Opening Balance I Closing Balance I 5 . 1 1 . 7 PROJECTED BALANCE SHEET
YEAR 11 YEAR 111 I YEAR I '
The ba lance s h e e t p r e s e n t s t h e f i n a n c i a l p i c t u r e o f t h e
company a t a p a r t i c u l a r p o i n t i n t ime which c o n s i s t s of i t s
a s s e t s a s w e l l a s l i a b i l i t i e s .
TABLE 5.14
BALANCE SHEET PROJECTION AS AT 31ST I
FIXED ASSETS
Bu i ld ing & C i v i l Works 1 500
T o t a l Gross Fixed
Asse t s 1950
Less Cumulative
p 1 1 1 7 7
De r e c i a t i o n
Net Fixed Asse t s 1773
Pre- inves tment Cost
Less Dep rec i a t i on 1 0 I I
Net Pre- inves tment cos ts1 40 I I
Current Asse t s I I M a t e r i a l S tock a t Cost
i n c l u d i n g work i n Pro-
g r e s s & Stock o f f i n i s h e d
Produc t s .
Opera t ing ba lance broughC
forward. I - -
Cash kt hand & i n bank I 1 1426
Accounts Rece ivab le I 1 1 1 2
T o t a l Cur ren t Asse t s I 1 1718
T o t a l Asse t s 3531
Long Term L i a b i l i t i e s
Equi ty 1000
CEMBEI
YEAR 11
W ' 000
1500
450
!:;R 1 YF? 1 YE? ,
W'OOO W'OOO W'OOO
R e t a i n e d E a r n i n g s
Long t e rm Loan
T o t a l Long Term
L i a b i l i t i e s
C u r r e n t L i a b i l i t i e s
S h o r t t e r m o v e r d r a f t
Accounts p a y a b l e
Repayment o f Long Term
Lo an
Net P r o f i t
T o t a l L i a b i l i t i e s
C u r r e n t R a t i o
D e b t - E q u i q R a t i o
Quick(Acid Test3 R a t i o
5 .11 .8 RATES OF RETURN'. ON INVESTMENTS
R a t e s o f ~ t u ? ? l on i n v e s t m e n t i s c a l c u l a t e d u s i n g t h e
fo rmula beLow: -
Net P r o f i t x 100 - C a p i t a l 1
RATES OF RETURN :
1st Year = 18.62%
2nd Year = 36.04 '
3rd Year = 38.97%
4 t h Year = 46.38%
5 t h Year = 63.519
Average r a t e o f r e t u r n on inves tment i s t h e r e f o r e 40.7%
5.11.9 PAYBACK PERIOD
The payback p e r i o d o f t h e c a p i t a l employed i s s h o w n
below.
From t h e above, t h e payback p e r i o d f o r t h e p r o j e c t
TABLE b.15
( W ' 000)
i s p r o j e c t e d t o be two (2) y e a r s and t h r e e ( 3 ) months.
5.11.10 RETURN ON EQUITY
The r e t u r n on e q u i t y is c a l c u l a t e d u s i n g t h e formula :
INITIAL INVESTMENT
2417
1912
56
YEAR
0
1
2
3
INFLOW
-
505
1351
2270
RATES OF RETURN
Year 1
Year 11
Year 111
Year I V
Year V
Average r a t e of r e t u r n on equityemployed f o r t h e
f i r s t f i v e yea r s of o p e r a t i o n i s 3 2 . 3 %
5.12 ECONOMIC AND SOCIAL BENEFIT TO BE DERIVED
The p r o j e c t a p p r a i s a l p roces s a l s o looked a t t h e
economic b e n e f i t s and impact of t h e p ro jec t ,wi th a. view t o
s ee ing whether o r n o t t h e p r o j e c t w i l l make any improvement
on t h e socio-economic c o n d i t i o n . 6 ~ the a r e a .
The economic and s o c i a l b e n e f i t s t o be de r ived from
t h e p r o j e c t i nc lude t h e fo l lowing .
5 .12.1 CONTRIBUTION BY THE PROJECT TO GROSS DOMESTIC
PRODUCT
The b e n e f i t s t o be de r ived from t h e p r o f i t a r e
immense. The e x t e n t o f t h e n a t i o n a l economic b e n e f i t may
be seen from t h e p r o j e c t s e s t ima ted d i r e c t c o n t r i b u t i o n of
we l l over W15,000,000 ( f i f t e e n m i l l i o n ) t o t h e Gross Domestic
Product ion i n t h e f i r s t f i v e y e a r s of ope ra t i on . I t a l s o
. c o n t r i b u t e s more than W800,OOO ( e i g h t hundred thousand n a i r a )
t o Gross C a p i t a l Formation f o r t h e same pe r iod .
5.12.2 PROFITS EARNED BY PROJECT PROMOTERS/SPONSORS
Equi ty i n v e s t o r s and common s h a r e s o f t h i s p r o j e c t
s t a n d t o e a r n a t o t a l e s t i m a t e d Gross sumo~460,000 a s
d iv idedd i n t h e f i r s t f i v e y e a r s o f opena t ion w i t h
r e a sonab l e l i q u i d i t y r e s exyes .
5.12.3 TAX PAID BY THE P R ~ E C T
A t o t a l sum o f W2,108,533 (over two m i l l i o n and
hundred thousand n a i r a ) i s t o be p a i d t o t h e government
a s company t a x ove r t h e f i r s t f i v e y e a r s o f o p e r a t i o n .
Other t a x e s such a s income t a x t o be p a i d by t h e p r o j e c t
employees and t a x on d iv idends (when d e c l a r e d ) f o r t h e
same p e r i o d would s u b s t a n t i a l l y i n c r e a s e t h e government
t a x revenue.
5.12.4 MORE EFFECTIVE UTILISATION OF NIGERIAN LABOUR (EMPLOYMENT EFFECT)
The p r o j e c t i s expec ted t o employ 1 8 ( e igh t een )
NIger ian p e r s o n n e l , t h e r e b y h e l p i n g t o reduce t h e unemploy-
ment f i g u r e i n t h e coun t ry i n g e n e r a l . Goss remunera t ion
o f t h e l a b o u r t o be employed by t h e p r o j e c t du r ing t h e
f i r s t f i v e y e a r s o f o p e r a t i o n i s expec ted t o t o t a l
W2,017,221 (ove r two m i l l i o n n a i r a ) .
5.12.5 STIMULATION OF OTHER INDUSTRIAL EFFORTS :
The n e t cash income gene ra t ed by- t h e p r o j e c t i n
form o f t a x e s , d i v i d e n d s , wages and s a l a r i e s s h a l l
most c e r t a i n l y be s p e n t i n t h e purchase o f goods and
s e r v i c e s . The n e t e f f e c t o f such p u r c h a s e s wou1.d be
t h e s t i m u l a t i o n o f o t h e r p r o d u c t i o n a c t i v i t i e s .
The magnitude o f t h e p r o d u c t i o n would depend on t h e
r e t e v a n t income m u l t i p l i e r .
CHAPTER SIX
6.0 SUMMARY AND CONCLUSION
The need f o r p r o j e c t o r investment a n a l y s i s a r i s e s
from t h e s c a r c i t y of r e sou rces which i s a t t h e r o o t o f
most o r g a n i s a t i o n a l d e c i s i o n s . The a t t a inmen t o f
o r g a n i s a t i o n a l o b j e c t i v e s i s a p rocess i nvo lv ing t h e
a l l o c a t i o n of r e sou rces between money spen t i n one way t o
b e t t e r achieve one o b j e c t i v e and t h a t spen t i n ano the r
t o achieve ano ther o b j e c t i v e . Once t h i s b a s i c concept of
resource a l l o c a t i o n i s unders tood , t h e assence o f p r o j e c t
e v a l u a t i o n can t hen be a p p r c i a t e d .
S ince r e sou rces a r e s c a r c e and l i m i t e d , t hey must be
p u t t o t h e most e f f e c t i v e use . The purpose of p r o j e c t
a n a l y s i s i s t o achieve t h i s e.nd by making a s s u r e a s t h e
c i rcusmtances permit t h a t t h e p r o j e c t i s t e c h n i c a l l y sound, t h a
it w i l l p rov ide a reasonable economic and whew a p p r o p r i t e ,
f i n a n c i a l r e t u r n , t h a t i t s o b j e c t i v e cannot be achieved i n
some l e s s c o s t l y way. This purpose i s deemed t o have be-en
achieved by t h i s s tudy .
I n v e s t o r s a r e u s u a l l y concerned wi th t h e o v e r a l l
performance of t h e i r company. There a r e may measures of
corpora te -per formance b u t t h e a b i l i t y t o gene ra t e p r o f i t
i s t h e most r e a d i l y used. The p r o f i t a b i l i t y i n d i c a t e d i n
t h e s tudy g ive f a i r l y conducive answer t o how e f f e c t i v e l y
t h e ope ra t i ons of t h e p r o j e c t based on t h e f o r e c a s t c a p i t a l
investment and annual o p e r a t i n g r e s u l t s w i l l be. The
percen tage r a t e s o f Teturn on investment a r e h ighe r
t han t h e p ~ o j e c t e d growth r a t e o f N i g e r i a ' s Gross
Domestic product a t c u r r e n t market p r i c e . They a r e a l s o
h ighe r t han t h e p r e s e n t l end ing r a t e , t h i s makes t h e
p r o j e c t very v i a b l e . The schedule o f cash flow a l s o shows
a very h e a l t h y cash p o s i t i o n f o r t h e p r o j e c t . The s u r p l u s
ba lances s a t i s f y t h e l oan repayment, t h e o v e r d r a f t
r e t i r e m e n t , working c a p i t a l needs a s we l l a s t h e dividend
repayment when dec l a r ed . The p r o f i t and l o s s account
and t h e ba l ance r shee t p ro j ec tddns a l s o show a very h e a l t h y
f i n a n c i a l p i c t u r e f o r t h e f i r s t f i v e yea r s of t h e p r o j e c t .
From t h e fo regoing a n a l y s i s , t h e p r o j e c t can be s a i d
t o be p r o f i t a b l e and indeed v i a b l e .
I t i s a l s o very s a t i s f a c t o r y t h a t t h e p r o j e c t i s
t e c h n i c a l l y f e a s i b l e t o c o n t r u c t and ope ra t e a t t h e
l o c a t i o n earmarked f o r i t . The environment i s very
conducive wi th t h e a v a i l a b i l i t y o f needed u t i l i t i e s and
raw m a t e r i a l s i npu t f o r t h e s u c c e s s f u l ope ra t i on o f t h e
p r o j e c t . A ' b r i g h t f u t u r e f o r t h e p r o j e c t i s f u r t h e r
evidenced i n t h e d a t a c o l l e c t e d .
The market ing s t r a t e g y adopted should ensure t h a t ,
p roduc t ion schedule i s kep t a t d e s i r e d l e v e l s t o enhance
quick b ~ e a k e v e n . A s e a r l i e r i n d i c a t e d , t h e r e i s s t r o n g
f e e l i n g t h a t t h e p r o j e c t i s f i n a n c i a l l y i i a b l e a s can
be e s t a b l i s h e d from gene ra t ed accoun t i ng s t a t emen tS . and
s e n s i t i v i t y a n a l y s i s . Th i s p r o j e c t i s c apab l e o f g e n e r a t i n g
enough cash i n i t s r o u t i n e o p e r a t i o n s t o meet a l l t h e
company1 s f i n a n c i a l o b l i g a t i o n s i n a d d i t i o n t o making
s i g n i f i c a n t p r o f i t s f o r t i s promoters .
The NERFUND and N B C I whose o b j e c t i v e s a r e t o a s s i s t
sma l l and medium s c a l e e n t e r p r i s e s i n o b t a i n i n g medium t o
long term loans through some p a r t i c i p a t i n g f i n a n c i a l
i n t e r m e d i a r i e s may be approached f o r l oan a t lower i n t e r e s t
r a t e s t han i s a v a i l a b l e from conven t i ona l banking
t r a n s a c t i o n s .
F i n a l l y , t h e a n a l y s i s o f t h e f i n a n c i a l i m p l i c a t i o n s
of t h e p r o j e c t have some s i g n i f i c a n t e f f e c t s ' i n e n a b l i n g u s
r e ach d e c i s i o n . I t i s c r y s t a l c l e a r t h a t t h e i n t e r e s t s
of bo th t h e owners and c r e d i t o r s a r e w e l l p r o t e c t e d a s
evidenced by t h e v a r i o u s encouraging r a t e s computed. The
p r o j e c t i s t h e r e f o r e recommended w i thou t r e s e r v a t i o n t o
f i n a n c i a l i n s t i t u t i o n s f o r fihanciB;1. a s s i s t a n c e a s w e l l
a s ko p o t e n t i a l sponsors and i n v e s t o r s .
A P P E N D I X 5, --
DEPARTMENT O F MANAGEMENT
Tel: 332091 Ext. 42
21st Junc;1995 ..................................................... DATE
TO WKOM IT MAY CONCERN ---
The above~nnmed is an MBA student in t h e department
o f ~ n n & e r n e n t , U n i v e r s i t y -of' Nigeria, E a u p Cnmpus.
He&&ia undertaking Renear& work i n odmection w i t h
h i s b e * H13A dissertation. . . . ...
We request that you please g ive h im/heryour m~xirnum
. . ce-operat ion,
OUESTIONAIRE
APPENDIX I 1
Dear Respohdent ,
CONSUMER QIJESTIONAI RE
The q u e s t i o n s below a r e f o r a r e s e a r c h work on t h e
e s t ab l i shmen t of a sma l l s c a l e soap manufactur ing i n d u s t r y
i n Ahiazu Local Government Area w i t h s p e c i a l emphasis on
household consumption o f soap. The q u e s t i o n a i r e i s
i n t ended t o p rov ide answers on t h e b e s t way o f meet ing
t h e need and demand o f p o t e n t i a l consumers o f t h e p roduc t .
I hope your answer t o t h e s k r q u e s t i o n s w i l l be o f
g r e a t h e l p t o me i n t h e seseach ;
You a r e n o t expec ted t o w r i t e your name on t h i s pape r .
I w i l l be v e r y g r a t e f u l i f you w i l l answer t h e s e q u e s t i o n s
o b j e c t i v e l y . You a r e ve ry f r e e t o exp re s s your op in ion
where you do n o t have cho i ce among t h e a l t e r n a t i v e s p rov ided .
Thanks f o r your expec ted co -ope ra t i on .
Yours f a i t h f u l l y ,
INSTRUCTION
P l e a s e , t i c k 'X' i n t h e space - /-[ prov ided f o r answers
SECTION A: PERSONAL DATA
130
Male /'-/ Female - 7'-[
Age: (a ) Under 20 y r s - / (b) 21-29 y r s /.-/
M a r i t a l S t a t u s : Married - /--/ S i n g l e - 7
Educa t iona l Q u a l i f i c a t i o n : ( a ) S t anda rd S i x and below - // - .-
(b) School C e r t i f i c a t e and below - / / (c)NCE and above - /
Income p e r annum: ( a ) W1200-W3900 -. // (b)W1000-~6900/-
Tc) W7000 and above // (d) No Fixed Income // 7 -
P l a c e o f Residence: ( a ) Within t h e L . G . A . // (b) Outs ide -.
t h e L . G . A L7
Occupation: I n d i c a t e a s a p p r o p r i a t e .
SECTION B :
I n which zone o f t h e L . G . A . do you l i v e i n .
(a) Ahiazu Ehs t 7 (b) Ahiazu West // (d) Ekwerazu - - Eas t // (d) Ekwerazu West /7 - -
Do you u se soap Yes J , No 17 -
Which brand o f b a r soap do you use p r e s e n t l y
How o f t e n do you use b a r soap (a ) Very o f t e n - // (b) Occas iona l l y ';r--fCc) Not a t a l l /-/' - \ Es t ima t e your monthly expend i t u r e on soap consumption
What do you p r e f e r most i n your brand o f b a r soap ( a ) The
c o l o u r - /7 1b)Degree o f foaming - // ( c ) Q u a l i t y 17 (d) P r i c e /7 -
7 . Who makes t h e buying d e c i s i o n i n t h e household (a) Myself
/-7 (b) my w i f e /7 (c ) my husband, 7-{(d) Anybody // - - - - 8. What in f luences . your buying d e c i s i o n
( a ) Brand l o y a l t y - //, (b) P r e v a i l i n g p r i c e - /j/
( c ) Q u a l i t y o f product - If (d) Nothing - //
9. Where do you u s u a l l y buy your soap
(a ) Supermarkets // (b) Local markets - // (c ) P r o v i s i o n
s t o r e s /7 -
10. What i s your buying b e h a v i o u r l i k e r ega rd ing q u a n t i t y
(a).::Bklk:-purchase - / , (b) S i n g l e purchase when needed
/7 - 11. How do you c o n s i d e r t h e p r e s e n t p r i c e o f your b rand of
soap ( a ) ve ry h i g h /7 (b) Mollerately h igh /7 (c ) Af fordab le - I-/'
1 2 . Does i n c r e a s e i n p r i c e a f f e c t your d e c i s i o n t o buy a product
( a ) Yes / No /7
(13) Would you c o n s i d e r t h e p r i c e o f l o c a l l y manufactured soap
a s a r e f l e c t i o n o f i t s q u a l i t y
1 4 . Does adver t i sement o f a p roduc t i n f l u e n c e your buying
d e c i s i o n o f t h a t p a r t i c u l a r p roduc t
(a) Yes - // (b) No / / (c ) Do n o t l i s t e n t o a d v e r t i s e -
ment 7 - 7 -
15. I f y e s , which media i n f l u e n c e s you (a ) Radio - //
(b) T e l e v i s i o n ' 7 7 (c) Newspapers - /'-/ (d) Hand b i l l -- .. .
16. P l e a s e sugges t any improvement you w i l l expec t i n new
brands of soap t o be i n t roduced i n t h e market i n
f u t u r e .
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